AnnuAl RepoRt 2015

Transcription

AnnuAl RepoRt 2015

DEMIRE Deutsche Mittelstand Real Estate AG
Annual Report 2015
Financial year January 1 – December 31, 2015
2
DEMIRE Deutsche Mittelstand Real Estate AG | Annual Report 2015
Portrait
First in secondary locations
DEMIRE Deutsche Mittelstand Real Estate AG has commercial real estate
holdings in mid-sized cities and upcoming areas bordering metropolitan
areas across Germany. The Company has its special strength in these
secondary locations – first in secondary locations – and focuses on
properties which that are particularly attractive for medium-sized
companies. DEMIRE has grown rapidly in recent years as a result of
aquisitions of individual properties and company shares alike. At the
end of the 2015 fiscal year, DEMIRE’s portfolio contained rental space of
1.1 million sqm with a market value of almost EUR 1 billion.
The portfolio’s focus on office, retail and logistic properties results in
a risk structure that DEMIRE believes is reasonable for the commercial
real estate segment. The Company places importance on long-term
contracts with solvent tenants and, therefore, anticipates stable and
sustainable rental income.
DEMIRE intends to maintain its corporate organisation as lean as
possible, although it believes that economies of scale and portfolio
optimisation are best achieved by having its own in-house asset,
property and facility management. This safeguards the Company’s
business expertise and, equally important, allows the Company to
maintain direct contact with the customer.
The shares of DEMIRE Deutsche Mittelstand Real Estate AG are listed
on the regulated market (General Standard Segment) of the Frankfurt
Stock Exchange.
3
DEMIRE at a glance
EBIT
Rental Revenue
43.3
NAV
58.4
+ 0.5 %
230.7
58.7
+ 344 %
+ 1,170 %
51.7
3.7
2014
2015
2014
2015
2014
2015
in EUR millions
Property portfolio
focus on three Asset Classes
1.100
928
181
72
150
Retail 19.6 %
6.4
5.4
333
33
350
Office 65.0 %
Breakdown according
to potential rent as at
31.12.2015
Logistics 8.6 %
Others 6.8 %
Number
properties
Market value
(EUR million)
Net rent,
excl. utilities
(EUR million)
31/12/2014
WALT
(Years)
Rental space
(m² thousands)
31/12/2015
Group Key Figures
EURK
Consolidated income statement
Rental revenue
Net rental income
EBIT
Financial result
EBT
Net profit/loss for the period
Net profit/loss for the period per share (undiluted / diluted, in EUR)
Consolidated balance sheet
Total assets
Investment properties
Non-current assets held for sale
Total portfolio
Financial liabilities
Cash and cash equivalents
Net financial liabilities
% of total portfolio (LTV)
Equity according to the consolidated balance sheet
Equity ratio in %
Equity attributable to equity holders of the parent company (NAV)
EPRA NAV (undiluted / diluted)
EPRA NAV per share (undiluted / diluted, in EUR)
01/01/2015–
31/12/2015
01/04/2014–
31/12/2014
43,344
23,680
58,740
-25,728
33,012
28,873
1.09 / 0.71
3,749
2,290
58,434
-2,938
55,496
45,707
3.03 / 1.74
31/12/2015
31/12/2014
1,032,945
915,089
13,005
928,094
373,012
333,070
0
333,070
655,239
28,467
626,772
67,5
295,665
4,397
291,268
87,4
264,902
25.6
230,697
256,267 / 271,585
5.20 / 4.25
54,629
14.6
51,684
60,996 / 71,420
4.26 / 2.84
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Competitive strengths
Focus
■ Clear investment strategy
■ Focus on commercial real estate holdings in secondary locations
in Germany
■ Value appreciation through favourable purchase prices
Combined approach
■ Value-Added strategy with a Core Plus approach
■ Stable cash flows generated by Core Plus strategy
■ Appreciation potential through Value-Added
Value chain
■ Fully integrated real estate group
■ Coverage of the entire value chain from purchase and
management to sale, when strategically feasible
■ Group in-house asset, property and facility management
Flexibility
■ Flat hierarchies
■ Short and quick decision-making process
Expertise and commitment
■Long-standing experience and extensive expertise in the real
estate industry
■Efficient processes
Capital market
■ Increasing market capitalisation
■ Active in equity and debt capital markets
■ Aimed at long-term oriented dividend policy
Long-term approach
■ DEMIRE strives for long-term value appreciation of the core
portfolio
■Not interested in temporary profit increases
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Contents
2
DEMIRE AT A GLANCE
2
Portrait
CONSOLIDATED FINANCIAL
STATEMENTS
3
Share and key figures
88
Consolidated statement of income
4
Competitive strengths
89
Statement of comprehensive income
5
Contents
90
Consolidated balance sheet
92
Consolidated statement of cash flows
93
Consolidated statement of changes in
equity
6
Foreword of the Executive Board
10
Report of the Supervisory Board
16
First in Secondary Locations
36
88
94
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
94
A.
General information
103
B.
Scope of consolidation and
consolidation methods
DEMIRE on the capital market
124
C.
Accounting policies
Interview with the Executive Board
143
D. Notes to the consolidated
statement of income
COMBINED MANAGEMENT REPORT
(GROUP AND AG)
153
E.
Notes to the consolidated balance
sheet
36
I.
184
F.
38
II. Economic report
Notes to the consolidated
balance sheet
57
III. Changes in the composition of
the governing bodies
186
G. Notes to the consolidated
statement of changes in equity
58
IV. Remuneration report
188
H. Group segment reporting
62
V.
194
I.
64
VI. Report on opportunities, risks,
and outlook
217
Attachments to the Notes
73
VII. Acquisition related information
228
Balance sheet oath
82
VIII.Corporate Governance/
Statement on Corporate
Governance
229
Auditor’s report
IX. Management Report for DEMIRE
Deutsche Mittelstand Real Estate AG
231
Imprint & Contact
16
Highlights 2015
18
Portfolio
26
32
82
Group principles
Subsequent events
Other disclosures
Disclaimer: The report is published in German and as an English translation. In the event of any conflict or inconsistency
between the English and the German versions, the German original shall prevail.
6
Foreword of the Executive Board
Ladies and Gentlemen,
For DEMIRE Deutsche Mittelstand Real Estate AG, the year 2015 represented a year of tremendous
growth – partly due to direct investments, but mainly as a result of the acquisition of a majority
interest in Fair Value REIT-AG at the end of the fiscal year. These investments more than tripled the
value of our real estate portfolio bringing it to a total of almost one billion euros.
Since the Fair Value acquisition took place shortly before the year’s end, this quantum jump in growth
is reflected in our balance sheet but not yet evident in our income statement. At the end of 2015, the
sum of the contracted annual net rent, excluding utilities, of DEMIRE’s real estate holdings amounted
to EUR 72 million or around eighteen times higher than DEMIRE’s total net rent in 2014. There is no
better illustration of the new dimension our company has grown into in 2015. We are now one of the
leading listed companies in our industry measured in terms of revenue and portfolio value.
Naturally, this rise was due in large part to our takeover of Fair Value REIT-AG, whose former
shareholders we would like to welcome at this point as new DEMIRE shareholders. Holders of a total
of 77.7 % of the shares accepted our voluntary public takeover offer to exchange one Fair Value share
into two DEMIRE shares. These shareholders clearly saw the benefits that we believe accompany
the acquisition: similar business models with very different acquisition channels, the potential for
economies of scale from the joint management of properties through the Group’s own asset, property
and facility management operations and a significantly stronger foundation for further growth.
We not only grew rapidly in 2015 but for the first time we also diversified our portfolio through
targeted direct investments in new rental segments resulting in the introduction of new asset
classes. The acquisition of Logistikpark Leipzig marked our entry into the logistic property segment,
and the acquisition of Gutenberg-Galerie in Leipzig our entry into the retail property segment – a
step that was substantially reinforced by our takeover of Fair Value REIT-AG at the end of the year.
Our purchase of Kurfürsten-Galerie in Kassel represented a further investment in this asset class
but had no influence on the 2015 financial statements because it was transferred to us only at the
beginning of the current fiscal year. These purchases make us less dependent on the office segment.
We are diversifying our risks.
A natural consequence of the property portfolio’s tremendous expansion was a few personnel
changes. The second-tier management of important areas such as asset, property and facility
management as well as real estate acquisition, have been reinforced with seasoned industry and
professional experts. The same is true for central functions such as accounting and controlling. In
2015, the number of employees increased from eight to a total of 54. Nevertheless, the DEMIRE
Group’s corporate structure remains lean.
Foreword of the Executive Board | Report of the Supervisory Board | First in Secondary Locations
COMBINED MANAGEMENT REPORT (GROUP AND AG) | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | Balance sheet oath | Auditor’s report
» Foreword of the Executive Board
From left to right: Dipl.-Kfm. (FH) Markus Drews, Executive Board Member (COO), Hon.-Prof. Andreas Steyer MRICS,
Speaker of the Eecutive Board (CEO), Frank Schaich, Executive Board Member (CFO)
In addition, the Executive Director of Fair Value REIT-AG, Frank Schaich, was appointed in early
February 2016 to DEMIRE’s Executive Board, bringing the number of Board members to a total of
three. This expansion reflects the wider range of tasks within the Group. At the same time, Mr.
Schaich remains responsible for the destiny of Fair Value REIT-AG.
While taking various steps to accelerate our growth in 2015, we improved our operating business at
the same time. This becomes evident from the key figures in our income statement, which do not or
do not yet fully reflect the effect of the acquisitions. We were also able to improve our Company’s
financial stability during the reporting year. Investments made in ten portfolio and individual
properties in cities such as Berlin, Bremen, Leipzig and Stralsund and the Fair Value acquisition were
predominantly financed by the issue of new shares. This had a positive effect on the equity ratio,
increased the net asset value per share and reduced the Group’s net debt ratio – all factors that
should benefit the interests of shareholders.
The Company’s tremendous appreciation in value was accompanied by a sharp increase in DEMIRE’s
market capitalisation, which saw more than an eightfold increase during 2015 and amounted to more
than EUR 200 million at the year’s end. This raises the Company’s visibility, improves share liquidity
and increases the interest in our company of capital market participants. Thus, in 2015, we were able
to lay the foundation for even more success on the capital market going forward.
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8
This is an important factor when it comes to financing our targeted future growth, for which we
believe we are well equipped. We can use our integrated property management approach to raise
our value appreciation potential. By concentrating on secondary locations, we have distinguished
ourselves on the market in a manner that can be summed up by our slogan „First in secondary
locations“. Moreover, our takeover of Fair Value has proven that we can complete even major
acquisitions successfully.
We welcome you, our shareholders and business partners, to continue to accompany us on this
journey and embark on the next chapter in the Company’s history, which we hope will prove to be
just as successful as in the previous fiscal year.
Finally, we would like to thank all of the DEMIRE Group’s employees for their unwavering commitment.
Without their exceptional efforts, this performance would not have been possible. They have earned
our full appreciation.
Frankfurt/Main, May 2016
Hon.-Prof. Andreas Steyer
Dipl.-Kfm. (FH) Markus Drews
Frank Schaich
Speaker of the Executive Board
Executive Board Member
(CEO)
(COO)
(CFO)
» Foreword of the Executive Board
▼ Logistikpark, Leipzig
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10
Report of the Supervisory Board
Dear Shareholders,
In the 2015 fiscal year, the Supervisory Board performed the tasks and exercised the responsibilities
incumbent upon it pursuant to the law, DEMIRE Deutsche Mittelstand Real Estate AG’s Articles of
Association and its rules of business procedure.
The Supervisory Board and the Executive Board continuously worked together and communicated
regularly. Along with the topics explicitly mentioned in this report, the work and communication
of the boards extended to all other material issues concerning the Company and the Group. The
Supervisory Board consulted regularly with the Executive Board and supervised the conduction of
business under the aspects of legality, effectiveness and economic efficiency. The Executive Board
directly involved the Supervisory Board in decisions of fundamental significance for the Company
and the Group.
As in the previous years, the Executive Board kept the Supervisory Board informed in a timely and
comprehensive manner on the basis of detailed written and verbal Executive Board reports. These
reports included a detailed discussion on all important issues related to the development of the
markets relevant for the Company and the Group, short- and long-term corporate planning and
current business performance. The position of the Company and the Group, the liquidity and risk
situation, the Group-wide risk management system, current real estate projects and the further
strategic development of the Group were also part of these discussions. The information provided
by the Executive Board was critically reviewed by the Supervisory Board for plausibility. The subject
matter and the scope of the Executive Board’s reporting fully met our requirements at all times.
The Supervisory Board reviewed the detailed clarifications submitted by the Executive Board
when business development diverged from the previously approved plans and targets as well as
information on measures necessary to counter any divergence. After careful examination and
consultation, the Supervisory Board members approved the reports and proposals of the Executive
Board to the extent required by the provisions of the law and the Articles of Association.
The chairman of the Supervisory Board was comprehensively informed by the Executive Board in a
timely manner by way of written and verbal reports – also outside of scheduled Supervisory Board
meetings – of particular business transactions that were of key significance in assessing the position
and the development and for the management of the Company and the Group. Matters requiring
approval were promptly submitted by the Executive Board for resolution.
The chairman of the Supervisory Board was regularly in personal and close contact with the Executive
Board and kept himself regularly informed of current business developments and significant business
transactions. He also kept the other Supervisory Board members informed outside of the scheduled
meetings and discussed developments with them.
During the reporting year, there were no conflicts of interest on the part of the members of the
Executive Board or Supervisory Board that would require immediate disclosure to the Supervisory
Board and information to the Annual General Meeting.
» Report of the Supervisory Board
The Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG with the Chairman
Prof. Dr. Hermann Anton Wagner (middle), Günther Walcher (left) and the Deputy Chairman Dr. Peter Maser (right).
Changes in the Supervisory Board
After the resignation of Dr. Dirk Hoffmann as a member of the Supervisory Board as at
December 31, 2014, DEMIRE welcomed Dr. Peter Maser, Attorney at Deloitte Legal Rechts
anwaltsgesellschaft mbH, Stuttgart, as a new member of the Supervisory Board. By resolution of the
district court of Frankfurt/Main, Dr. Maser was appointed as a member of the Supervisory Board on
January 12, 2015. The Extraordinary General Meeting on March 6, 2015 resolved to appoint Dr. Peter
Maser as a member of the Supervisory Board until the close of the Annual General Meeting that will
resolve the discharge of the members of the Supervisory Board for the fiscal year ending December
31, 2015. In the subsequent constituent meeting of the Supervisory Board, Dr. Peter Maser was
elected deputy chairman.
Members of the Supervisory Board in the 2015 Fiscal Year
■Prof. Dr. Hermann Anton Wagner (from April 17, 2013; chairman from October 23, 2013)
■
Dr. Peter Maser (from January 12, 2015; deputy chairman from March 6, 2015)
■
Günther Walcher (from October 23, 2013)
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12
Supervisory Board Committees
The Supervisory Board consisted of three members in the 2015 fiscal year. The Supervisory Board
did not form any committees since this is impractical with only three members.
Work of the plenum during the Reporting Year
The Supervisory Board held four meetings during the 2015 fiscal year on April 28, 2015, June 5, 2015,
July 29, 2015, and December 2, 2015. The Supervisory Board also discussed and resolved current
issued in numerous telephone conferences.
On June 5, 2015, the Supervisory Board together with the Executive Board discussed DEMIRE Deutsche
Mittelstand Real Estate AG’s Declaration of Conformity pursuant to Section 161 of the German Stock
Corporation Act for the 2015 fiscal year. This discussion related to the recommendations of the
„Government Commission German Corporate Governance Code“ published by the Federal Ministry
of Justice in the official section of the electronic Federal Gazette in the version of June 24, 2014, as well
as any divergences from these recommendations. The Declaration of Conformity was subsequently
published on the Company’s website (www.demire.ag/en/company/corporate-governance).
At the meeting on June 5, 2015, the Supervisory Board dealt extensively with the financial statements
and consolidated financial statements for the 2014 rump fiscal year, including the combined
management report for the Company and the Group, adopted the annual financial statements and
approved the consolidated financial statements.
The auditor participated in this meeting and presented the key findings of the audit. Ernst & Young
GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart was chosen as the auditor by the Annual General
Meeting and was mandated by the Supervisory Board. The financial statements, including the
combined management reports for the Company and the Group, were reviewed by the auditor and
furnished with unqualified audit opinions.
Work of the plenum after the Fiscal Year’s Close
At the meeting on March 1, 2016, the Supervisory Board dealt in depth with the Company’s business
performance and the plans for the current fiscal year.
On April 29, 2016, the Supervisory Board together with the Executive Board discussed DEMIRE Deutsche
Mittelstand Real Estate AG’s Declaration of Conformity pursuant to Section 161 of the German Stock
Corporation Act for the 2015 fiscal year. This discussion related to the recommendations of the
„Government Commission German Corporate Governance Code“ published by the Federal Ministry
of Justice in the official section of the electronic Federal Gazette in the version of May 5, 2015, the
Corporate Governance Report and the Statement on Corporate Governance pursuant to Section
289a of the German Commercial Code. The Declaration of Conformity was subsequently published
on the Company’s website (www.demire.ag/en/company/corporate-governance).
At the meeting on April 29, 2016, the Supervisory Board also dealt extensively with the preliminary
financial statements and consolidated financial statements for the 2015 fiscal year, including the
combined management report for the Company and the Group. The auditor took part in this meeting and
presented the key findings of his audit to date. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft,
Stuttgart was appointed as the auditor by the Annual General Meeting and was mandated by the
Supervisory Board.
In a further meeting on May 13, 2016, the auditor confirmed that following his audit of the financial
statements, including the combined management report for the Company and the Group, they were
furnished with unqualified audit opinions.
The Supervisory Board subjected the financial statements, the consolidated financial statements, and
the combined management report for the Company and the Group to its own review and approved
the results of the audit conducted by the auditor. No objections were raised following the issue of
the final audit report on the annual financial statements, the consolidated financial statements, the
combined management report for the Company and the Group, and the auditors audit reports. The
Supervisory Board approved the financial statements, the consolidated financial statements and the
combined management report on May 13, 2016, thus adopting the Company’s financial statements.
Matters of the Executive Board
On December 2, 2015, the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG extended
the contract of CEO Hon.-Prof. Andreas Steyer by an additional three years, thereby prematurely
amending and extending his Executive Board contract, which expired at the end of February 2016,
through February 2019.
Effective February 1, 2016, Mr. Frank Schaich was appointed as a member of the Company’s Executive
Board for a term of three years.
Continued Implementation of the Buy & Hold Strategy
In the 2015 fiscal year, DEMIRE Deutsche Mittelstand Real Estate AG continued to apply its „buy
and hold“ strategy resolved in June 2013 by acquiring several real estate portfolios, properties and
the majority of voting rights in Fair Value REIT-AG. The Company also tripled its business volume
compared to the prior year creating a real estate group with a portfolio of commercial property of
around EUR 1 billion.
With the consent of the Supervisory Board, DEMIRE relied mainly on capital increases to finance the
steps in the Company’s growth.
This has brought the Group closer to its long-term strategic goal of giving shareholders the opportunity
to participate in the Company’s success through an attractive dividend policy.
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14
A word of thanks from the Supervisory Board
The Supervisory Board would like to thank the Group’s employees and the Executive Board
members Hon.-Prof. Andreas Steyer and Mr. Markus Drews for their extraordinary commitment and
constructive collaboration in this very eventful 2015 fiscal year.
This report was discussed in detail at the Supervisory Board meeting on April 29, 2016 and adopted
by the Supervisory Board at its meeting on May 13, 2016.
Frankfurt/Main, May 2016
Prof. Dr. Hermann Anton Wagner
(Chairman)
▼ Gutenberggalerie, Leipzig
15
16
First in Secondary Locations
January
Alpine Real Estate GmbH
becomes a DEMIRE shareholder by subscribing to
capital increase against
contribution in kind
March
Increase of 2014/2019 corporate bond in the amount
of EUR 50 million bringing
the total to EUR 100 million
May
Issue and placement of
mandatory convertible
bond with a volume of
EUR 15 million
Ketom AG becomes a
DEMIRE shareholder by
subscribing to capital increase against contribution
in kind
July
Successful placement of
a 10 % cash capital increase
Wecken & Cie. becomes
a DEMIRE shareholder by
subscribing to a cash capital increase
July
Announcement of
voluntary public
takeover offer to
the shareholders
of Fair Value REITAG
Placement of a convertible
bond with a volume of
EUR 15 million
M1 Beteiligungs GmbH
becomes a DEMIRE shareholder by subscribing to
capital increase against
contribution in kind
01
2015
02
January
Completion of purchase
of commercial real estate
portfolio with rental space
of 42,000 m² upon the
recording in the commercial register of a capital
increase against contribution in kind
Property companies
Hanse-Center and
Glockenhofcenter
Bremen, Berlin, Stralsund,
among others
Use: Office property
Rental space: 42,000 m²
03
04
April
Purchase of another property in Schwerin
Margaretenhof,
Schwerin
GRI: EUR 0.55 million
05
06
May
Completion of acquisition of Gutenberg Galerie,
Leipzig
Gutenberg Galerie,
Leipzig
Use: Office/retail property
07
08
July
Completion of purchase of
Logistikpark Leipzig, Leipzig
Logistikpark Leipzig,
Leipzig
Use: Logistic/office property
July
Purchase of KurfürstenGalerie, Kassel
kurfürsten-galerie,
Kassel
Use: Retail property
0
09
17
» Highlights 2015
November
Exceedance of minimum acceptance ratio
of takeover offer made
to shareholders of Fair
Value REIT-AG
October
Publishment of offer
document for shareholders of the Faire Value
REIT-AG
December
Successful completion
of Fair Value REIT-AG
takeover
January
All acquisitions made
in 2015 successfully
completed
Obotritia Capital KGaA
becomes a DEMIRE
shareholder through a
share exchange as part
of the Fair Value REIT-AG
takeover
February
DEMIRE strengthens
in-house property management by undertaking an acquisition
Appointment of Frank
Schaich to DEMIRE
Executive Board
Contract extension for
CEO, Hon.-Prof. Andreas
Steyer
10
11
October
Completion of purchase of
Telekom portfolio
12
01
2016
02
03
04
December 2015
Majority interest in Fair Value REIT-AG
T6-Portfolio
(Telekom), 6 properties,
Ansbach, Bonn, Flensburg, Freiburg, Regensburg and Stahnsdorf
■ Commercial property portfolio with 40 properties and 272,000 m² of
rental space
■ Market value EUR 300 million
■ Rental income: EUR 24 million
■ NAV: EUR 117 Millionen
■ Consolidated profit/loss: EUR 6.6 million
Status as of year-end 2015
18
broadly diversified Portfolio
Real estate holdings and company locations (selected examples)
MecklenburgWestern Pomerania
SchleswigHolstein
6.0 %
Stralsund
Rostock
Schwerin
Hamburg
Hamburg
Bremen
Bremen
Lower-Saxony
3.3 %
0.7 %
North RhineWestphalia
SaxonyAnhalt
Wuppertal
Leverkusen
Dusseldorf
Berlin
Berlin
2.7 %
2.6 %
Bonn
Cologne
Brandenburg
6.4 %
5.5 %
Thuringia
31.3 %
Hesse
1.8 %
Eisen
hüttenstadt
Leipzig
Saxony
Dresden
0.9 %
14.4 %
5.6 %
Wismar
0.4 %
Rheinland-
Palatinate
Eschborn
Frankfurt a. M.
Darmstadt
Bayreuth
Saarland
Stuttgart
8.1 %
Bavaria
Baden- Ulm
Wurttemberg
10.4 %
Munich
Freiburg
Kempten
Office
Retail
Logistics
Other
Business Locations
32 %
percentage of total rental space
» Portfolio
Overview of core real estate portfolio
Properties
Market
value
Total rental space
thereof
office
thereof
retail
thereof
logistics
thereof
others
Net
rent,
excl.
utilities
EPRA
Vacancy rate
Status as at: Year-end
2015
Number
in EUR
million
in m²
in m²
in m²
in m²
in m²
in EURk
in %
Baden-Wuerttemberg
5
114
85,851
85,017
0
0
833
8,279
7.2
24
95
110,235
93,886
0
0
16,349
7,731
7.7
1
4
7,136
0
7,136
0
0
348
35.3
Brandenburg
12
50
67,813
31,857
31,818
0
4,138
4,928
21.5
Bremen
10
39
34,750
34,750
0
0
0
2,707
15.7
1
7
3,973
0
3,973
0
0
536
0.0
12
62
58,154
48,622
0
0
9,532
4,529
14.3
8
108
59,717
38,537
20,886
0
294
7,591
7.1
Lower Saxony
15
17
28,210
5,887
14,818
0
7,505
1,596
1.0
North Rhine-Westphalia
31
196
153,706
94,408
22,010
0
37,289
14,954
5.5
6
12
19,016
12,406
0
0
6,610
1,100
5.7
30
127
333,583
52,730
21,939
218,697
40,217
9,795
32.4
5
34
29,169
800
24,041
0
4,327
2,766
2.6
15
60
63,789
62,132
0
0
1,657
5,038
0.9
6
3
9,888
0
5,504
0
4,384
270
36.7
181
928
1,064,990
561,033
152,125
218,697
133,135
72,168
12.8
20
570
624,200
322,428
83,075
218,697
0
42,847
15.3
Bavaria
Berlin
Hamburg
Hesse
MecklenburgWestern Pomerania
Rhineland Palatinate
Saxony
Saxony-Anhalt
Schleswig-Holstein
Thuringa
Germany
TOP 20 properties
Expansion of real estate portfolio
In the course of its rapid growth, DEMIRE’s real estate portfolio nearly tripled in the 2015 fiscal
year. At the end of the reporting period, the Group held 181 commercial properties with rentable
building space totalling almost 1.1 million m². DEMIRE is among the leading listed commercial real
estate holders in Germany. The properties are located exclusively in Germany, mostly in larger cities
and mainly in the catchment areas of economically strong metropolitan regions. Real estate experts
assessed the market value of the German real estate holdings (investment properties and noncurrent assets held for sale) at EUR 928.1 million as at the reporting date.
19
20
In 2015, DEMIRE began to expand the portfolio – which previously consisted almost exclusively of
office properties – to include retail and logistic properties in order to diversify its risk. This shift of
focus was reinforced through the initial consolidation of Fair Value REIT-AG, whose sub-portfolio
properties’ primary use is retail.
Measured by potential rent at full occupancy, office properties, at 65.0 %, made up the largest share
of the portfolio at the end of 2015. A total of 19.6 % of the potential rent can be achieved with retail
use, 8.6 % with logistic properties and 6.8 % can be achieved through other uses.
DEMIRE reports the occupancy rate as a ratio of the contractual rents (EUR 72.2 million at the
reporting date) to potential rent, in other words, the rent that could be achieved at full occupancy
based on prevailing market rents. These amounted to EUR 82.8 million on the same date, which
results in a yield-weighted occupancy rate of 87.2 % of potential rent.
DEMIRE holds commercial properties in almost all federal states in Germany, but with different
emphases. The properties’ distribution, their rental space, market values and net annual rents are
provided in the following table.
Broad base of high credit quality tenants with long-lease cintracts in place
» Portfolio
The weighted average lease term (WALT) at the end of 2015 was 5.4 years. The portfolio’s strong
expansion makes a comparison to the previous year (abbreviated 2014 fiscal year: 6.4 years) of little
significance.
Legacy portfolio
The legacy portfolio, which contains the properties in Eastern Europe and the Black Sea Region
purchased prior to the Company’s realignment, is being divested in a step by step process. The
carrying amount of the legacy portfolio’s real estate inventory as at the balance sheet date was
EUR 2.3 million (December 31, 2014: EUR 7.4 million).
focus on three asset classes
Retail 19.6 %
Breakdown according
to potential rent as at
31/12/2015
Office 65.0 %
Logistics 8.6 %
Others 6.8 %
Real Estate portfolio
1,100
928
181
72
150
6.4
5.4
333
Number
properties
33
Net rent,
excl. utilities
Market value
(EUR million)
WALT
(Years)
(EUR million)
31/12/2014
31/12/2015
350
Rental space
(m² thousands)
21
22
top 20 properties - short portrait
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
North Rhine-Westfalia
Bonn
Office
approx. EUR 72.6 million
aprox. 38,500 m²
approx. EURk 5,401
0.0 %
Rostocker hof (retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Mecklenburg-Western Pomerania
Rostock
Retail
approx. 19,300 m²
approx. EURk 4,373
approx. 2.1 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Baden-Wuerttemberg
Ulm
Office
approx. 47,500 m²
approx. EURk 4,245
approx. 1.9 %
Kurfürstengalerie (retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Hesse
Kassel
Retail, Office
approx. 21,500 m²
approx. EURk 3,896
approx. 6.4 %
Logistics Park leipzig
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Saxony
Leipzig
Logistics, Office
approx. 218,000 m²
approx. EURk 3,956
approx. 29.0 %
» Portfolio
Office Building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Baden-Wuerttemberg
Freiburg
Office
approx. 22,600 m²
approx. EURk 2,621
0.0 %
Office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Bavaria
Regensburg
Office
approx. 29,000 m²
approx. EURk 2,467
0.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
North Rhine-Westfalia
Düsseldorf
Office
approx. 24,000 m²
approx. EURk 1,837
approx. 32.1 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Hesse
Eschborn
Office
approx. 18,700 m²
approx. EURk 1,957
0.0 %
Gutenberggalerie (retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Saxony
Leipzig
Retail, Office
approx. 20,700 m²
approx. EURk 1,361
approx. 19.7 %
23
24
Lerchenberg Center (retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Saxony-Anhalt
Wittenberg
Retail
approx. 14,700 m²
approx. EURk 1,646
approx. 3.9 %
City center (retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Brandenburg
Eisenhüttenstadt
Retail
approx. 30,500 m²
approx. EURk 1,793
approx. 40.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Hesse
Darmstadt
Office
approx. 14,300 m²
approx. EURk 1,330
0.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Schleswig-Holstein
Flensburg
Office
approx. 23,800 m²
approx. EURk 1,642
0.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Bavaria
Unterschleißheim
Office
approx. 15,600 m²
approx. EURk 1,098
approx. 27.0 %
» Portfolio
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Schleswig-Holstein
Neumünster
Office
approx. 11,800 m²
approx. EURk 1,038
0.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Brandenburg
Stahnsdorf (Berlin)
Office
approx. 17,100 m²
approx. EURk 1,845
0.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Bavaria
Kempten
Office
approx. 16,700 m²
approx. EURk 1,044
approx. 1.8 %
Humbold center (Retail property)
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Saxonia
Zittau
Retail
approx. 18,500 m²
approx. EURk 1,400
approx. 1.0 %
office building
Federal state:
Location:
Use:
Market value:
Rental space:
Net rent:
Vacancy rate:
Hesse
Langen
Office
approx. 13,600 m²
approx. EURk 851
approx. 39.8 %
25
26
DEMIRE on the capital market
DEMIRE shares outperform
The German stock market developed positively overall in 2015. The DAX 30 index, which contains
the 30 largest listed companies in Germany, ended the 2015 fiscal year roughly 10 % higher after
fluctuating strongly throughout the year. The General Standard Index, of which DEMIRE is a
constituent, improved by just over 3 % in 2015. This is in sharp contrast to the strong rise in the
EPRA Germany sector index, which is the sector index for listed German real estate companies and
350,00includes the key companies in the German real estate sector. This index ended the year over 19 %
higher than its level at the year’s start.
300,00
DEMIRE’s shares managed to outperform all these indices by rising from EUR 1.80 on the last trading
day of 2014 to EUR 4.43 on the last trading day of 2015 for an increase of roughly 46 %. Despite this
250,00
performance, the shares still traded below their net asset value, which – when calculated using the
EPRA method – amounted to EUR 5.08 per share at the year’s end.
200,00
Market capitalisation rises substantially
150,00
At the end of 2015, DEMIRE’s market capitalisation reached almost EUR 220 million. This level
corresponds to an eightfold increase in market value compared to the prior year and places DEMIRE
100,00among the leading listed commercial real estate companies in Germany.
50,00The share’s average daily trading volume increased nearly 70 % from approx. 16,600 shares in 2014
30.12.2014
31.03.2015
30.06.2015 more visibility
30.09.2015
31.12.2015
to approx. 28,300 in 2015.
This gave DEMIRE considerably
on the stock market in 2015
and made it an eligibleDEMIRE
investment for
a growing
number ofDAX
domestic and
foreign
investors.
General
Standard
EPRA
Germany
Performance of DEMIRE shares vs. indices 2015
350
300
250
200
150
100
50
30.12.2014
31.03.2015
DEMIRE
30.06.2015
General Standard
30.09.2015
DAX
31.12.2015
EPRA Germany
Source: German Stock Exchange
» DEMIRE on the capital market
Share capital more than triples
The increase in market capitalisation corresponds largely to the increasing share capital which more
than tripled in the course of 2015 and as at the balance sheet date amounted to EUR 49.3 million.
Several capital increases against contribution in kind and one cash capital increase initially caused
the share capital to double. The number of shares increased sharply once more following the
acquisition of Fair Value REIT-AG because the acquisition was based on a share exchange for new
shares in DEMIRE.
The following capital increases were recorded in the commercial register.
■
In January 2015, new capital was created from a capital increase against contribution in kind
from authorised capital in the amount of EUR 5,633,710 to refinance a portfolio containing
eight commercial properties with total usable space of 42,000 m² in the cities of Berlin,
Bremen and Stralsund, among others.
■
In May 2015, another capital increase against contribution in kind in the amount of
EUR 2,182,567 was executed for the purchase of the Gutenberg-Galerie in Leipzig The property
contains rentable space of almost 21,000 m², approximately 11,900 m² of which is office space.
■
In July 2015, an increase in the Company’s share capital from authorised capital in the
amount of EUR 2,541,149.00 against a mixed contribution in kind with the exclusion of
shareholders’ subscription rights was executed for the purchase of a logistic property in
Leipzig with approximately 184,000 m².
Market capitalisation of peer group (in EUR million, year-end 2015)
2,182
1,876
1,185
641
601
450
320
Deutsche
EuroShop
Alstria/DO
TLG
Immobilien
DIC Asset
Hamborner
VIB
Vermögen
WCM
218
199
DEMIRE
publity AG
Source: German Sock Exchange, own analysis
27
28
■
Also in July 2015, a cash capital increase creating 2,474,152 new shares was subscribed to by
Wecken & Cie., Basel, Switzerland, at a price of EUR 4.51 per share. The gross proceeds of
EUR 11.2 million were used for the further expansion of the commercial real estate portfolio
and to strengthen the Company’s financial position.
■On December 21, 2015, a capital increase against contribution in kind was executed
for the takeover of Fair Value REIT-AG. This transaction raised DEMIRE’s share capital by
EUR 21,927,756.00 to EUR 49,292,285.00 divided into 49,292,285 no-par value shares.
Share capital was also increased in 2015 by the exercise of conversion right from the 2013/2018
convertible bonds into 226,800 shares. As of the December 31, 2015 reporting date, a total of
10,661,700 convertible bonds were still pending conversion. Additionally, 15,000,000 shares can be
converted from the 2015/2018 mandatory convertible bonds during their remaining term.
Shareholder structure: 50 % of shares in free float
Through the expansion of the capital base, DEMIRE’s shareholder structure has seen significant
changes in 2015. At the end of 2015, 49.9 % of DEMIRE’s shares were in free float. No single shareholder
is able to decide a vote at the Annual General Meeting based on his or her shareholding. The largest
single shareholders are:
■
Wecken & Cie. with 12.9 %, which became a shareholder by subscribing to the cash capital
increase in July 2015;
■Obotritia Capital KGaA, including investment vehicles, with 12.7 %, who, as a former
shareholder of Fair Value REIT-AG, became a shareholder by accepting the exchange offer;
■
DeGeLog Deutsche Gewerbe-Logistik Holding GmbH with 8.3 %, who was already a
shareholder in the prior year;
DEMIRE sharholder structure as of december 31, 2015
Wecken & Cie. (12.9 %)
Obotritia Capital KGAA (12.7 %)
DeGeLog Deutsche Gewerbe-
Logistik Holding GmbH (8.3 %)
Alpine Real Estate
Invest GmbH (6.6 %)
Freefloat
(Holdings <3 %)
(49.9 %)
M1 Beteiligungs GmbH (5.2 %)
Ketom AG (4.4 %)
Source: German Securities Trading Act messages, own anlaysis
■
Alpine Real Estate Invest GmbH with 6.6 %, who was also a DEMIRE shareholder in the prior
year;
■
M1 Beteiligungs GmbH with 5.2 %, who contributed a 94.0 % interest in Logistikpark Leipzig
GmbH in July 2015 as a contribution in kind; and
■
Ketom AG with 4.4 %, who sold the Gutenberg-Galerie in Leipzig to DEMIRE in May 2015
and became a DEMIRE shareholder through a capital increase against contribution in kind.
Net asset value (NAV)
The „best practice recommendations“ of the European Public Real Estate Association (EPRA) represent
generally accepted recommendations to supplement the IFRS reporting of real estate companies by
providing a transparent calculation of the net asset value.
The EPRA NAV (undiluted) developed as illustrated in the following table. In the reporting year, the
EPRA NAV (undiluted) rose about 20 % from EUR 4.26 per share to EUR 5.20 per share despite the
significantly higher number of shares outstanding as at the balance sheet date.
Renewed authorised and conditional capital
To be able to continue growing in the future and take advantage of available acquisition opportunities
quickly and flexibly, it is in the interest of all stakeholders that the Company has access to sufficient
authorised and conditional capital. Therefore, this has been a recurring topic at all of DEMIRE’s
General Meetings during the 2015 fiscal year.
At the year’s end, DEMIRE had access to authorised capital totalling EUR 20.7 million and conditional
capital of EUR 13.7 million.
Net Asset Value (NAV)
in eurk
NAV for the period
Deferred Taxes
Undiluted EPRA NAV
Shares in millions
Undiluted EPRA NAV per share EUR
31/12/2015
31/12/2014
230,697
51,684
25,570
9,312
256,267
60,996
49.29
14.31
5.20
4.26
Diluted EPRA NAV
271,585
71,420
Shares in millions
63.95
25.19
4.25
2.84
Diluted EPRA NAV per share EUR
29
30
Limited use of debt financing
DEMIRE intends to strengthen its equity ratio, lower its Loan-to-Value and reduce the average interest
on total borrowings. Accordingly, the Company made it a top priority to expand its equity base and
was cautious in its assumption of debt in 2015. Although the non-current financial debt increased by
EUR 355.7 million, EUR 262.5 million of this amount is attributed to the takeover of Fair Value REIT-AG
and other acquisitions. The average interest on total borrowings decreased to 5.2 % p.a. in the course
of the initial consolidation of Fair Value REIT-AG.
DEMIRE continued to rely on different forms of exchange-listed bonds. In March 2015, the volume of
the 2014/2019 corporate bond issued in the prior year was increased by EUR 50 million to a total of
EUR 100 million based on the same terms. The bond has a five-year maturity and an interest coupon
of 7.5 %. The net proceeds of the corporate bond were used to finance further portfolio acquisitions
and boost the Company’s financial position.
In mid-May 2015, the 2015/2018 mandatory convertible bond was issued with a volume of
EUR 15 million against a contribution in kind and excluding shareholders’ subscription rights. As
part of this transaction, one investor subscribed to the mandatory convertible bond by contributing
fractional bonds from the 2014/2019 corporate bond. The convertible bond has a three-year maturity
until 2018 and can be converted as of September 1, 2015.
Conversions
In the 2015 fiscal year, a total of 226,800 shares were issued based on conversion rights. This is
the equivalent of a 0.46 % interest in the Company’s share capital at the end of 2015. As of the
December 31, 2015 reporting date, a total of 10,661,700 convertible bonds from the 2013/2018 bond
were still pending conversion. Additionally, 15,000,000 shares can be converted from the 2015/2018
mandatory convertible bonds during their remaining term.
share
ISIN
31/12/2015
31/12/2014
DE000A0XFSF0
DE000A0XFSF0
Symbol / Ticker
DMRE
DMRE
Stock Exchange
Frankfurt Stock Exchange (FSE);
XETRA
Frankfurt Stock Exchange (FSE);
XETRA
Market segment
Share capital
Number of shares
Ø daily trading volume
01/01/2015–31/12/2015
Market capitalisation
Freefloat
General Standard
General Standard
EUR 49,292,285.00
EUR 14,306,151.00
49,292,285
14,306,151
28,278
16,656
EUR 218.32 million
EUR 25.75 million
49.90 %
61.36 %
Mandatory Convertible Bond 2015/2018
Name
DEMIRE Pflicht-Wandelanleihe 2015/2018
Issuer
Type of security
Convertible bond
Volume
EUR 15,000,000
Interest rate (coupon)
2.75 %
Interest payments
quarterly on March 22, June 22, September 22, December 22
Repayment
May 22, 2018
Redemption rate
100 %
Denomination
EUR 100,000
Paying Agent
Bankhaus Gebr. Martin Aktiengesellschaft, Göppingen
ISIN
DE000A13R863
Market segment
Frankfurt Stock Exchange
Corporate bond 2014/2019
Name
DEMIRE BOND 2014/2019
Issuer
Type of security
Bearer bond
Volume
EUR 100,000,000
7.5 %
Interest payments
half-yearly March 16 and September 16
Repayment
September 16, 2019
Redemption rate
100 %
Denomination
EUR 1,000
Paying Agent
ISIN
DE000A12T135
Market segment
convertible bond 2013/2018
Name
DEMIRE DT.MTS.RE WDL13/18
Issuer
Type of security
Convertible bond
Volume
EUR 11,300,000
6%
Interest payments
quarterly in arrears
Repayment
December 30, 2018
Redemption rate
100 %
Denomination
EUR 1
Conversion rate
EUR 1
Paying Agent
ISIN
DE000A1YDDY4
Market segment
31
32
Interview with the Executive Board
From left to right: Frank Schaich, Executive Board Member (CFO), Hon.-Prof. Andreas Steyer MRICS, Speaker of the
Eecutive Board (CEO), Dipl.-Kfm. (FH) Markus Drews, Executive Board Member (COO)
DEMIRE’s real estate holdings have grown substantially in the past few years. What are your
plans for this year and the following year?
Andreas Steyer: We have set ourselves three targets for the year 2016 that we believe take priority:
The integration of Fair Value REIT-AG into the DEMIRE Group, the improvement of our operating
performance and a reduction in our interest burden by refinancing our existing liabilities. Naturally,
we are keeping an eye out for potential acquisitions. At the very least, we need to do this in the
interest of our shareholders. Before we consider an acquisition, we need to make sure it is attractive
and, above all, fits into our strategy. Growth, however, will not be the utmost priority in 2016. We
would rather take this year to stabilise our cash flow and improve our profits. What will play a large
part in attaining this will be our in-house asset, property and facility management activities
Why are these activities so important?
Markus Drews: Most important, of course, is strong operating management. We have this. Our
employees have extensive experience in the real estate sector and do an excellent job. We can be
proud of who we have on board. Therefore: quality is the most important prerequisite. Managing
real estate in-house offers the key advantage of being very close to the customer. You can speak
directly with the customer and find out what he or she wants and needs. There is no filter standing
between you. Similar to what people prefer in their personal life: they would rather speak directly
» Interview with the Executive board
with their contract partner than some middleman. And, our tenants reward us for this by paying fair
rents, accepting lengthy rental periods and establishing an overall mutually amicable relationship.
Experience pays
Will joint operating management also play a role in the integration of Fair Value REIT-AG and
DEMIRE AG?
Frank Schaich: Yes, and a central role at that. We want the portfolios of DEMIRE AG and Fair Value
REIT-AG to be managed going forward by our in-house asset, property and facility management
operations. At the same time, this will integrate the entire IT systems and all services related to real
estate management. Of course this will take time because there are already contracts for various
services that must be met. We expect these efforts to generate synergy effects of up to two million
euros – not immediately, but over the medium term.
And, in terms of staff integration, my appointment to the DEMIRE Executive Board was an important
step and I continue to retain the full responsibility for Fair Value REIT-AG.
Is your asset, property and facility management personnel even sufficiently prepared for the
kind of growth momentum that will emerge from Fair Value REIT-AG’s integration?
Markus Drews: Naturally not, otherwise this would have meant that the staff had been underutilised
until now. To bring the staff up to the level necessary for the new challenges, we acquired the real
estate management company F. Krüger Immobilien GmbH in Bremen in early 2016. Through this
acquisition, we now have sufficient personnel and are able to offer real estate management services
and meet all of our needs internally. This is more cost-efficient than working with several different
external service providers by the mere fact that we keep complexity low, require just one IT system,
do not need to establish interfaces and have all holdings managed under one roof.
At this point, I would also like to mention that we continue to have a lean staff organisation at our
Group’s central offices.
How is all of this expected to be reflected in profits?
Markus Drews: It It is difficult to be specific at the moment because it takes time for the positive
effects to be reflected on the cost side. The Group as a whole was already very successful in terms of
revenues, however. In the first three months of 2016, we were able to close new rental contracts for
more than 10,000 m² of rental space at five locations. We were particularly pleased with the fact that
we were able to gain several new anchor tenants for the Eisenhuettenstadt shopping centre owned
by the Fair Value Group. The new contracts secure the lasting repositioning of the entire property for
many years to come. What is also important is that we have been able to win over well-known names
from both the private and public sector, which naturally reduces the delinquency risk. This, by the
way, also shows the solid quality of our portfolio.
33
34
Frank Schaich: The success we have had in rentals already in the first three months of the current
fiscal year represents a positive impact of slightly more than one million euros in annual net rental
income, excluding utilities, on an annual basis. This impact, however, will not be fully visible until
fiscal year 2017. This is also the manner in which we are improving and stabilising our cash flow and
funds from operations – two indicators that our industry considers to be key for operational success.
You mentioned a third priority in 2016 – refinancing. How will you approach this?
Frank Schaich: The interest DEMIRE pays on a weighted average for debt is comparatively high. This
is a result of comparably expensive financing instruments, which were necessary to make the strong
growth of the past two years even possible. The fact is, we are not yet at the level of our competitors
in terms of our interest burden. We now want to and can change this but only step by step. We have
already taken the first step by partially refinancing a high-yield mezzanine loan bearing 20 percent
interest through operating loans with a weighted interest rate of below 5 percent p.a. This action
alone will significantly reduce our interest expense in 2016. And, I believe there are several more
million euros in potential savings still to come and am confident we will make significant progress
towards realising these savings in the next 12 months.
2015 proved to be a record year for the German real estate market. The outlook for the global
economy, however, is somewhat subdued. Will this have implications for DEMIRE’s business
performance?
Andreas Steyer: As you know, DEMIRE’s operates exclusively in the German commercial real estate
market. According to the majority of economic analysts, the German economy appears quite robust.
Businesses are employing an increasing number of people – which is surely good news for a supplier
of office and logistics properties such as ourselves. In addition, private consumption is expected to
remain a key driver of overall economic growth in 2016. Accordingly, retail properties, such as those
we offer, continue to be in demand – despite the competition retailers face from online vendors. This
gives us confidence that we will be able to further increase our portfolio’s occupancy rate and, in
turn, keep rents stable or slightly increase them.
Furthermore, interest rates are likely to remain low, which is always positive for the real estate
industry. So all in all, we expect 2016 to be a successful year in which we can turn our newly achieved
size into economic success.
» Interview with the Executive board
▼ Office building, Eschborn
35
36
Combined group management report and management report of
DEMIRE Deutsche Mittelstand Real Estate AG,
Frankfurt/Main, for the fiscal year of
January 1, 2015 to December 31, 2015
The following presents the combined Management Report for DEMIRE Deutsche Mittelstand Real
Estate AG, Frankfurt/Main, („the Company“) and the Group („DEMIRE“ or the „DEMIRE“ Group) for the
2015 fiscal year from January 1 to December 31, 2015. The Company prepares its ¬financial statements
according to the provisions of the German Commercial Code (HGB) and the special provisions of the
German Stock Corporation Act (AktG). The consolidated financial statements are prepared according
to the principles of International Financial Reporting Standards (IFRS), as applicable in the European
Union. The scope of consolidation is presented in detail in the notes under Item B (1).
I. Group principles
1. Business model
DEMIRE Deutsche Mittelstand Real Estate AG is a public stock corporation under German law,
headquartered in Frankfurt/Main, with no other branch offices. The shares of DEMIRE Deutsche
Mittelstand Real Estate AG (ISIN DE000A0XFSF0) are listed on the regulated market (General Standard
Segment) of the Frankfurt Stock Exchange and on the regulated unofficial market of the Stuttgart,
Berlin and Dusseldorf stock exchanges.
Since its strategic realignment in 2013, DEMIRE concentrates exclusively on the German commercial
real estate market and is active as an investor and property holder in the segment for secondary
locations where its activities include the acquisition, management and the rental of commercial
properties. Value appreciation should be achieved through active asset, property and facility
management; which in some cases includes the sale of individual properties when they no longer
align with the business model.
Following the takeover of Fair Value REIT-AG, DEMIRE classified its business activities and organised
its segment reporting under four segments: Core Portfolio, Fair Value REIT, Corporate Functions/
Others and Investments. The first three segments reflect the Company’s current strategic direction
whereas the Investment segment contains only the remaining properties in Eastern Europe and the
Black Sea Region from its business activities prior to the realignment. DEMIRE has already divested
itself of many of the original commitments and is actively pursuing the sale of the remaining
properties. The aim is to discontinue this business segment entirely.
The strategically important segment „Core Portfolio“ includes the assets and activities of DEMIRE’s
subsidiaries and sub- subsidiaries that were part of the Group prior to the takeover of Fair Value
REIT-AG. The main assets are the commercial properties in Germany. This segment also includes the
in-house asset, property and facility management activities established and expanded in 2015 that is
intended to ensure that existing properties generate the best possible returns. Another strategically
important segment is the „Fair Value REIT“ segment which comprises the activities of the acquired
company. The segment „Corporate Functions/Others“ contains the Group’s administrative and
general tasks such as risk management, finance, controlling, financing, legal, IT and compliance.
» Group principles
2. Strategy and Objectives
Strategy
Since the Company’s realignment in 2013, DEMIRE’s aim has been to become one of the leading
holders of commercial real estate in Germany. On the road to becoming „first in secondary locations“,
in its own assessment, the Company has made considerable progress in just two years, not only
through the acquisition of individual commercial properties and real estate portfolios but primarily
through its acquisition of a majority interest in Fair Value REIT-AG at the end of 2015. The steps made
in the Company’s growth in 2015 alone led to almost a tripling of total rental space and annual net
rents, excluding utilities.
The Company’s investment strategy is based on a balanced risk-opportunity profile, which is reflected
in the fact that DEMIRE intends to hold or acquire only those properties that generate positive cash
flow from the outset and have several financially sound tenants, especially when they permit the
alternative use of property. The Company prefers prime locations in medium-sized cities and upand-coming areas bordering metropolitan centres throughout Germany. This is also designed to take
regional differentiation into account. Moreover, in order to not be solely dependent on one business
segment, DEMIRE seeks to build a total portfolio, structured exclusively around office, retail and
logistics properties. A very marketable volume of EUR 10 million to EUR 50 million is envisioned for
each investment.
DEMIRE believes it can best achieve a balanced risk-opportunity ratio through a combination
of investment strategies known as value-added and core-plus. The value-added strategy focuses
on acquiring undervalued properties that are then repositioned after their development and, if
necessary, renovation or revitalisation. When this leads to a gradual improvement in cash flows, the
value of the property enjoys a sustained appreciation in value. A relatively high proportion of debt is
considered with this type of investment strategy to improve the leverage effect. The assets, however,
must already generate positive cash flow in order to be considered for investment.
The aim of the core-plus approach is to select properties with good to very good tenant structures,
with the expectation that these properties typically can achieve relatively high positive cash flow
from the outset. Appreciation in value is often achieved with these types of properties only when the
existing leases expire, and the landlord can rerent the property at more advantageous conditions.
Usually, acquisitions made under the core-plus approach are financed with a comparatively low
proportion of debt. The properties’ holding period is generally long-term for both approaches.
Objectives
Along the lines of the strategic direction already described, DEMIRE’s target over the next three
years is to expand the existing portfolio to a level of EUR 2 billion in carrying amount. In this process,
DEMIRE is aiming to achieve a ratio of net debt to the sum of the existing real estate (Loan-to-Value
or LTV) of 50 %, which implies an equity ratio in future investments that is above this value.
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By achieving these operational objectives, the Company is in a position to give shareholders an
opportunity to participate in the Company’s success through dividends.
3. Control system
To achieve the targets DEMIRE has set itself in line with the strategic direction described, the
Company has designated operating cash flow (FFO) as its key performance indicator. Properties are
acquired only when they can generate positive cash flow from the start. The task of the Company’s
in-house asset, property and facility management is to improve this cash flow over time. On an
operating level, the trend in occupancy rates, actual net rents per square meter excluding utilities,
ongoing maintenance and operating costs, delinquent rents and marketing costs are all observed
and monitored using periodic target-performance comparisons. Integrated cash flow planning links
the business segments to the individual properties. Continuous monitoring of the occupancy rate is
carried out in addition to the use of the financial performance indicators already described. For more
information, we refer to the comments in the notes under „Investment Properties“.
Income and cash flows are aggregated and assessed quarterly at the level of the holding company.
The key indicator for measuring added value is the change in net asset value („NAV“) as defined by
the European Public Real Estate Association (EPRA). The ratio of net debt to the sum of the existing
real estate (Loan-to-Value (LTV) represents an additional performance indicator used by the Group.
Interest expenses are another key factor because they place a significant burden on the financial
result and thus the net profit/loss for the period as well as the cash flow. The active and ongoing
management of the debt financing portfolio combined with the continuous market monitoring is
carried out to achieve an ongoing improvement in the financial result.
4. Research and development
Given the focus of DEMIRE’s business activities on holding and managing real estate, the Company
does not conduct any research and development activities.
II. Economic report
1. Macroeconomic and industry environment
1.1. Macroeconomic environment
According to information published by the Federal Statistics Office (Statistisches Bundesamt), the
German economy grew 1.7 % in 2015. Private Consumption – probably the most important economic
aggregate for real estate companies – was indicated as a key driver of this growth, increasing 1.9 %
slightly outpacing the rise in gross domestic product. Aside from the generally favourable economic
conditions, German employment, which is more than 43 million strong and persistently low oil
prices were presumed to be the main factors stimulating private consumption. In addition to the
macroeconomic environment, the European Central Bank’s monetary policy continued to nurture a
low interest rate environment and favourable conditions for financing.
» Group principles | Economic report
1.2. Industry environment
Low interest rates not only create favourable conditions for financing, they also make it relatively
unattractive to hold cash assets. The real estate sector profits from this sentiment because it
increasingly forces domestic and foreign investors in Germany to search for assets that sustain their
value. Another factor supporting the sector is the limited supply of German commercial real estate
seen over the past several years.
1.2.1. Commercial real estate transaction market
In 2015, German commercial real estate continued to be an attractive segment for investors.
According to several institutions, transaction volumes in 2015 were a solid 40 % higher year-on-year
reaching a level of roughly EUR 55 billion. This marked another consecutive year of growth in the
commercial real estate transaction market as of 2009.
The weightings of the various asset classes have changed slightly compared to the previous year
with office property now accounting for 42 % of the total commercial real estate transaction market
versus 44 % in the prior year and retail properties now accounting for 31 % of the market after 22 %
in the prior year. To DEMIRE’s knowledge, there have been no German-wide studies published on the
transaction data for the logistic property market.
1.2.2. The market for office property
The strong economy and high employment created a positive environment in Germany for office
property. According to an analysis by the real estate consulting firm Jones Lang LaSalle ( JLL), the
office property vacancies declined 16 % in 2015. In what JLL defines as the „Big Seven“ locations
consisting of Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart, the average
vacancy rate at the end of 2015 even stood at a mere 6.4 %. Therefore, according to the experts at
JLL, companies from the telecommunications, IT and industrial branches are specifically looking for
suitable properties in secondary locations for cost reasons. Strong demand also forced a rise in rents
of an average 4 %. The increasing attraction of secondary locations is also supported by a study
carried out by DIP-Deutsche Immobilien-Partner which concluded that floor space turnover in such
locations is increasing, and the vacancy rates are falling.
1.2.3. The market for retail property
Retail sales rose nearly 3 % in Germany in 2015. This relatively robust growth in a long-term comparison
prompted a significant rise in retail property transactions to a record level of EUR 18 billion – an
almost twofold increase compared to the prior year. Foreign investors played a major role and were
responsible for more than half of the investments made.
According to JLL estimates, new rents in Germany totalled around 525,000 m² in 2015, or about 10 %
less than in the prior year. Rental prices, however, remained at the prior year’s level according to
an analysis published by BNP Paribas Real Estate. The reasons given for this consolidation included
stronger competition from online retailers and the growth of retail chain operators. According to
the German Realtor’s Association (IVD – Immobilienverband Deutschland), retail properties in B
locations experienced up to double-digit increases in rents in 2015. These increases were, however,
extremely varied depending on the specific city and location.
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1.2.4. The market for logistics property
The market for warehouse and logistics space in Germany is small in comparison to the market for
office and retail properties. According to the bulwiengesa research institute, warehouse and logistics
properties make up about 7 % of the total transaction market for commercial real estate. Transactions
in this segment also grew in 2015. A survey by JLL showed that the volume of transactions based on
the space sold grew 5 %. Growth was mainly generated outside of the large metropolitan areas. To
DEMIRE’s knowledge, there have been no German-wide studies published on the rent development
of warehouse and logistic properties.
1.2.5. Effects of commercial real estate market developments on DEMIRE
The general economic and market conditions in 2015 proved to be very advantageous for DEMIRE
Deutsche Mittelstand Real Estate AG’s business model. The takeover of Fair Value REIT-AG
strengthened the Company’s market position in retail properties. At the same time, DEMIRE used
the favourable market conditions to its advantage and made investments in logistics and retail
properties to further diversify its real estate portfolio. DEMIRE also profited from its focus on
secondary locations following the encouraging development in these locations and regions.
2. Business performance
During the reporting year, the DEMIRE Group was able to nearly triple its real estate portfolio as a result
of a number of portfolio and individual purchases of commercial real estate in secondary locations
in Germany and the takeover of 77.7 % of the voting rights in Fair Value REIT-AG. Furthermore, the
Group’s total assets and annual contractual rents from the German commercial real estate portfolio
as at the balance sheet date nearly tripled. At the same time, a significant portion was divested from
the legacy portfolio, which has holdings in Eastern Europe and was formed prior to the Company’s
realignment and adoption of a business model focussed on holdings in German commercial real
estate.
New acquisitions were financed partially through the assumption of existing loans of the target
companies holding the properties, partially through cash payments but mainly made possible by
the issue of shares of DEMIRE AG. A corporate bond initially issued in September 2014 was increased
by EUR 50 million to a level of EUR 100 million and further medium-term loans were taken up to
refinance the cash portion of the acquisitions. Also, a 10 % cash capital increase was executed that
brought proceeds of around EUR 11 million. At the end of the year, the acquisition of 77.7 % of the
voting rights of Fair Value REIT-AG was completed based on an exchange offer to all Fair Value REITAG shareholders that did not include a cash component.
Chronological business development
December 2014/January 2015
In December 2014, the Executive Board and Supervisory Board of DEMIRE Deutsche Mittelstand
Real Estate AG resolved to increase the Company’s share capital from authorised capital once from
EUR 14,306,151 to EUR 19,939,861 against contribution in kind excluding shareholders’ subscription
rights. In January 2015, Alpine Real Estate GmbH was admitted to subscribe to the new shares in
return for a contribution in kind to DEMIRE consisting of 94.9 % of the interests in Hanse-Center
Objektgesellschaft mbH, 94.9 % of the interests in Glockenhofcenter Objektgesellschaft mbH and
a receivable against Hanse-Center Objektgesellschaft amounting to EUR 9.0 million. Hanse-Center
Objektgesellschaft mbH and Glockenhofcenter Objektgesellschaft mbH hold a commercial real estate
» Economic report
portfolio comprising a total of nearly 42,000 m² with properties in Bremen, Berlin and Stralsund. The
purchase of the commercial real estate portfolio in return for the issued shares strengthened both
DEMIRE’s equity base and cash flow.
March 2015
At DEMIRE’s Extraordinary General Meeting on March 6, 2015, several resolutions on capital increases
were made, which paved the way for continued growth. Specifically, the Extraordinary General
Meeting resolved an increase in authorised capital through the issue of up to 8,552,290 shares
against a cash and/or contribution in kind once or in partial amounts of up to EUR 8,552,290.00
(Authorised Capital I/2015). Authorised capital was also increased by EUR 2,434,105.00 in order to
grant subscription and/or conversion rights. The Extraordinary General Meeting also resolved a
stock option programme with conditional capital of EUR 1,000,000.00 for members of the Executive
Board, selected Company employees and directors and employees of group companies. In the 2015
fiscal year, the maximum of 800,000 stock options was granted to Executive Board members and the
maximum of 200,000 stock options to employees.
On March 24, 2015, a resolution was made to increase the 2014/2019 corporate bond issued in
September 2014 by an additional EUR 50 million to a total of EUR 100 million through a private
placement. The net proceeds were used to finance further portfolio acquisitions and to strengthen
the Company’s financial position. The transaction was recognised as an increase of EUR 35.6 million
to EUR 85.6 million due to the partial placement of the newly created bonds.
April 2015
Based on a contribution agreement dated April 13, 2015, Ketom AG, headquartered in Wollerau,
Switzerland, contributed a 94 % interest in the property company Sihlegg Investments Holding
GmbH, also headquartered in Wollerau, Switzerland, as well as all claims resulting from a shareholder
loan granted to Sihlegg Investments Holding GmbH valued at EUR 4,775,366.67, including interest,
as at April 1, 2015 as a contribution in kind against the issue of 2,182,567 new shares of DEMIRE at
EUR 4.028 each by utilising DEMIRE’s authorised capital in accordance with the Company’s Articles
of Association.
Sihlegg Investment Holding GmbH is the owner of the office and retail property Gutenberg Galerie
in Leipzig. This property, built in 1994, is close to the city centre and contains around 20,750 m² of
rentable space, 11,900 m² of which is office space. The building complex also contains a 4-star hotel
with 122 rooms. The acquisition of the Gutenberg-Galerie retail property in Leipzig increased the
share of retail assets in DEMIRE’s portfolio in the first half of 2015.
In addition, the property in Bielefeld contained in the Alpine portfolio was sold at its carrying amount
of EUR 1.65 million for strategic reasons. The transfer of benefits and obligations took place on
April 7, 2015 in accordance with the contract.
May 2015
In May 2015, with the Supervisory Board’s consent, the Executive Board resolved to increase the
Company’s share capital from authorised capital once in the amount of EUR 2,541,149.00 against a
mixed contribution in kind excluding shareholder subscription rights. M1 Beteiligungs GmbH, Berlin,
was admitted to subscribe to the new shares in return for a contribution in kind consisting of a 94 %
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interest in Logistikpark Leipzig GmbH. Logistikpark Leipzig GmbH is the sole owner of a logistics
property in Leipzig known as „Logistikpark Leipzig“. The acquisition of Logistikpark Leipzig marked
the Company’s entry into the logistics asset class.
The former logistics complex, which belonged to Quelle (constructed in 1994), contains total rental
space of around 184,000 m² on property of roughly 330,000 m² situated approximately 10 km north
of Leipzig’s city centre. The property consists of around 164,000 m² of warehouse space, nearly
20,000 m² of office space, 35,000 m² of surrounding area and has two areas for expansion totalling
about 38,000 m² that already possess building rights. The registration of the capital increase at the
commercial register took place on July 1, 2015.
In mid-May 2015, the Company issued a mandatory convertible bond with a volume of EUR 15 million
against contribution in kind and excluding shareholders’ subscription rights. The bond was issued
with a coupon of 2.75 % p.a. and can be converted at an initial conversion price of EUR 5.00 per share
as of September 2015. The conversion into DEMIRE shares will take place at the latest on the maturity
date of May 22, 2018 at the conversion price, adjusted if necessary. As part of the transaction, an
investor subscribed to the new mandatory convertible bond by contributing fractional bonds from
the first tranche of the 2014/2019 corporate bond. Based on the bond’s terms and conditions, the
predominant share of the convertible bond was classified as equity in the consolidated financial
statements.
June 2015
On June 30, 2015, DEMIRE Deutsche Mittelstand Real Estate AG resolved the purchase of a 94 % interest
in Germavest Real Estate S.à.r.l. („Germavest“). Germavest Real Estate S.à.r.l. has a commercial real
estate portfolio containing approx. 144,000 m² of rental space as well as 2,171 underground and
free-standing parking spaces (the „T6 property portfolio“) located in the cities of Ansbach, Bonn,
Flensburg, Freiburg, Regensburg and Stahnsdorf. All six locations have long-term rental contracts
with Deutsche Telekom. The annual net rent, excluding utilities, of initially around EUR 14.8 million
will be adjusted annually for changes in the cost of living index. The average interest expense of
around 4.4 % p.a. for the Germavest financial liabilities is below the current average interest rate of
the DEMIRE Group’s financial liabilities. These liabilities are being reduced using a rapid repayment
rate, which will have a positive impact on the future development of the equity underlying DEMIRE’s
core portfolio. Based on the portfolio’s solid return ratios, DEMIRE expects an added contribution to
the positive cash flow of the Group’s entire portfolio and to the Group’s equity in connection with the
transaction’s initial consolidation. It was agreed to complete the transaction at the end of October
2015
July 2015
On July 7, 2015, DEMIRE announced its plans to restructure and streamline the legacy portfolio,
which was acquired before 2014. Of the roughly 60 companies contained in the legacy portfolio –
including those in the Netherlands, the Ukraine, Austria and Georgia – 30 have already been sold,
liquidated or merged. During the reporting period, three investments in the Ukraine were sold, and
the related high-interest mezzanine loan was repaid. The company, formed as a Dutch B.V., contains
the remaining companies and was streamlined once again resulting in a significant reduction in its
complexity. The purpose of the structural changes to simplify the legacy portfolio’s legal organisation
» Economic report
was to greatly reduce fixed costs and rapidly dispose of the entire legacy portfolio without impacting
the market.
On July 9, 2015, the Company concluded a contract for the purchase of a 94.9 % interest in Kurfürster
Immobilien GmbH, which owns the Kurfürsten Galerie in Kassel. This retail property, located directly
across from the „City-Point Kassel Einkaufszentrum“ in the centre of Hesse’s third largest city, has
total space of approximately 21,000 m² and includes the Kassel’s largest parking garage with around
600 parking spaces in the northern part of the inner city. The transfer took place in January 2016, and
the property will contribute to earnings for the first time in 2016.
On July 31, 2015, the Company decided to submit an offer to the shareholders of Fair Value REIT-AG,
Munich, in which it would acquire the shareholders’ no-par value bearer shares in Fair Value REIT-AG
with a notional interest in the share capital of EUR 2.00 per share by way of voluntary public takeover
offer (in the form of an exchange offer) and, subject to the final determination of the minimum price
and the final determination in the offer document, as consideration two (2) new no-par value bearer
shares of DEMIRE Deutsche Mittelstand Real Estate AG with an notional interest in the share capital
of EUR 1.00 per share with dividend rights from January 1, 2015 (the „DEMIRE shares“) from a capital
increases against contribution in kind (the „capital increase“) still to resolved by the Annual General
Meeting in exchange for one (1) Fair Value REIT share tendered under the takeover offer.
August 2015
On August 28, 2015, the Annual General Meeting passed resolutions to create new authorised capital
of EUR 13,675,702, issue convertible bonds and/or bonds with warrants, profit participation rights
and/or profit participation bonds with a total nominal value of up to EUR 125,000,000.00 and to
create additional conditional capital in the amount of EUR 3,919,447.00 for the purpose of granting
subscription and conversion rights for the bonds issued.
September 2015
At the Extraordinary General Meeting on September 14, 2015, shareholders of DEMIRE Deutsche
Mittelstand Real Estate AG laid the groundwork for the acquisition of Fair Value REIT-AG. With the
resolution to issue up to 30,761,646 new shares with a notional interest in the share capital of EUR 1.00
per share against contribution in kind, DEMIRE was able to offer Fair Value REIT-AG shareholders two
DEMIRE shares for one Fair Value REIT share in the context of a voluntary public exchange offer.
The General Meeting also resolved the creation of new authorised capital to align with DEMIRE’s
increased share capital in the event that the resolved capital increase against contribution in kind
for the purpose of acquiring the majority interest in Fair Value REIT-AG would be recorded in the
commercial register. With the consent of the Supervisory Board, the Executive Board is authorised
until September 13, 2020 to increase the share capital of DEMIRE Deutsche Mittelstand Real Estate
AG once or several times by issuing up to a total of 7,069,722 new shares with a notional interest in
the share capital of EUR 1.00.
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October 2015
On October 14, 2015, the offer document for the voluntary public takeover offer was released to
all Fair Value REIT-AG shareholders. The acceptance period during which one share of Fair Value
could be exchanged for two DEMIRE shares ended on November 16, 2015 at 24:00. The extended
acceptance period ended on December 3, 2015 at 24:00.
Under a contract dated October 19, 2015, it was agreed to reverse the acquisition of the interests in
Munich ASSET Verwaltung GmbH, which is the owner of the property on Hofer Straße 21-25, Munich,
and return the interests to VICUS AG effective September 30, 2015 for a payment of EURk 26. The
payment to Munich ASSET Management GmbH of the nominal value of the shareholder loan and
the transfer of the interests took place in December 2015. The deconsolidation of Munich ASSET
Vermögensverwaltung GmbH had a slightly positive effect on earnings.
On October 30, the purchase of the 94 % interest in Germavest Real Estate S.à r.l. („Germavest“)
was completed. The assignment of the proportionate purchase price of roughly EUR 39.0 million,
including the subsequent increase of EUR 2.9 million above the original purchase price, attributable
to the acquirer, DEMIRE Commercial Real Estate DREI GmbH, was performed by way of cash payments
totalling EUR 7.8 million, the assumption of loan liabilities of EUR 1.7 million, fractional bonds of the
coporate bond 2014/2019 in the amount of EUR 25.3 million and the deferral of a portion of the
purchase price in the amount of EUR 4.2 million until the end of 2015.
December 2015
A total of 10,963,878 Fair Value REIT shares representing roughly 77.7 % of Fair Value REIT-AG’s
share capital and voting rights were tendered by the expiry of the extended acceptance period
on December 3. The corresponding capital increase was recorded in the commercial register on
December 21, 2015. The initial consolidation of the Fair Value REIT-AG subgroup took place on the
reporting date. Therefore, DEMIRE AG did not include Fair Value REIT-AG’s minor contributions to the
income statement in its consolidated financial statements for the past fiscal year. On an annualised
basis, the Fair Value REIT-AG subgroup represented roughly one-third of the DEMIRE Group’s revenue
in 2016. Fair Value REIT-AG plans to pay a dividend of EUR 0.25 per entitled share for the year 2015.
Based on DEMIRE AG’s interest as the parent company this represents pro rata cash flow before
taxes of approximately EUR 2.7 million.
The assumption of the Signal Credit Opportunities (Lux) Investco II S.à.r.l. loan in the amount of
EUR 32.0 million at the end of December 2015 enabled the Company to repurchase the full amount of
fractional bonds from the seller of the interest in Germavest Real Estate S.à.r.l. A portion of the loan
specified for the purchase of the interests in Kurfürster Immobilien GmbH due in January 2016 was
paid into an escrow account.
» Economic report
3. Net assets, financial position, and results of operations
3.1. Results of operations
DEMIRE’s nearly tripled its holdings in commercial real estate in the 2015 fiscal year. Nevertheless,
the Company reported a lower net profit for the 2015 fiscal year than in the abbreviated 2014 fiscal
year. The main reason for this was exceptionally high general and administrative expenses and other
operating expenses, which offset the rise in profits from rentals. Expenses were particularly affected
by additional reporting obligations in the context of the capital increases and the acquisition of the
interest in Fair Value REIT-AG to the extent these expenses were not directly recognised in equity,
incidental acquisition costs that could not be capitalised resulting from the purchases financed by
capital increases against contribution in kind and the non-deductible input taxes on these costs.
The repayment of the mezzanine loan by the Dutch holding company and the sale of the interest in
OXELTON had a significantly negative impact on the Company’s profits as a result of an impairment
of the intercompany loan to OXELTON and the reversal of currency translation reserves related to this
company, which had already been recognised. In addition, the interest payments for debt financing
assumed in the second half of 2014 were reflected for a full twelve months for the first time and thus
were also included in the net profit for the period for the first time.
Selected information from the consolidated statement of income
Profit/loss from the rental of real estate
Profit/loss from the sales of real estate companies
Profit/loss from investments accounted for using the equity method
Other operating income and other effects
General and administrative expenses
01/01/201531/12/2015
EURk
01/04/201431/12/2014
EURk
23,680
2,290
743
69
-500
-1,014
51,414
63,651
-11,332
-3,648
-5,265
-2,914
Earnings before interest and taxes (EBIT)
58,740
58,434
Financial result
-25,728
-2,938
Other operating expenses
Profit/loss before taxes
33,012
55,496
28,873
45,707
Of which, attributable to parent company shareholders
28,117
43,302
1.09
3.03
25,889,465
14,306,151
0.71
1.74
40,551,165
25,194,651
Basic earnings per share (EUR)
Weighted number of shares outstanding
Diluted earnings per share (EUR)
Weighted number of diluted shares outstanding
In fiscal year 2015, the DEMIRE Group generated profit from the rental of real estate of EUR 23.7 million
– a tenfold rise compared to the level in the abbreviated 2014 fiscal year (EUR 2.3 million). This rise was
driven by the tremendous expansion of the commercial real estate portfolio in the abbreviated 2014
fiscal year. The majority of the acquired properties contributed to the profit/loss from the rental of
real estate for a full twelve-month period for the first time in 2015. In addition, commercial properties
acquired during the 2015 fiscal year made an initial pro rata contribution .
Profits from the sale of real estate and real estate companies amounted to EUR 0.7 million in the 2015
fiscal year compared to their level of EUR 0.1 million in the prior year.
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Profit/loss from investments accounted for using the equity method improved to EUR -0.5 million in
the 2015 fiscal year (abbreviated 2014 fiscal year: EUR -1.0 million). Included in this position are income
of EUR 1.5 million from the higher valuation of properties located in Frankfurt/Main belonging to the
SQUADRA Group, income of EUR 1.2 million from debt forgiveness in connection with the renegotiation
of the loan liabilities of a Dutch holding company of the DEMIRE Group and adverse effects on profit
totalling a net EUR 3.2 million from the sale of shares in OXELTON.
The DEMIRE Group’s other operating income and other effects in the 2015 fiscal year declined
to EUR 51.4 million compared to EUR 63.7 million in the abbreviated 2014 fiscal year. This figure
concerns primarily the fair value adjustments of EUR 18.5 million in 2015 (abbreviated 2014 fiscal
year: EUR 63.6 million)on properties purchased in the fiscal year, particularly the Gutenberg-Galerie
and Logistikpark in Leipzig, the properties in Bremen and the profit of EUR 33.2 million (abbreviated
2014 fiscal year: EUR 0.0 million) originating from a purchase below market value resulting from
the acquisition of the interest in Germavest. Specific bad debt allowances of receivables in 2015 of
EUR -2.8 million (abbreviated 2014 fiscal year: EUR -0.7 million) also had an impact on this line item and
resulted mainly from specific allowances of recievables against OXELTON (EUR 1.1 million).
The DEMIRE Group’s general and administrative expenses tripled in the 2015 fiscal year to a total
of EUR 11.3 million (abbreviated 2014 fiscal year: EUR 3.6 million). This rise is mainly the result of
higher consulting expenses for the preparation and execution of acquisitions carried out during the
year (EUR 4.7 million compared to EUR 1.4 million in the abbreviated 2014 fiscal year), higher costs
for the preparation and audit of financial statements (EUR 3.5 million compared to EUR 1.3 million in
the previous year) as well as increased staff costs (EUR 2.3 million compared to EUR 0.6 million in the
previous year) related to growth.
Other operating expenses amounted to EUR 5.3 million following EUR 2.9 million in the abbreviated 2014
fiscal year. This increase was mainly the result of a rise in non-deductible input taxes (EUR 1.1 million
compared to EUR 0.7 million), fees and incidental costs related to monetary transactions (EUR 0.5 million
after EUR 0.2 million), as well as expenses for the Annual General Meeting, two Extraordinary
General Meetings, and investor relations and related banking services (EUR 0.8 million compared to
EUR 0.1 million).
Earnings before interest and taxes (EBIT) amounted to EUR 58.7 million and slightly exceeded the
results of the abbreviated 2014 fiscal year (EUR 58.4 million).
The financial result totalled an expense of EUR 25.7 million (abbreviated 2014 fiscal year: expenses of
EUR 2.9 million). Transaction-related financial expenses rose from EUR 9.9 million in the abbreviated
2014 fiscal year to EUR 27.9 million and included higher financing expenses – some of which were
reported for a full twelve-month period for the first time – and an expense for the derecognition of the
interest portion of the OXELTON receivable of EUR 2.0 million.
» Economic report
On this basis, profit/loss before taxes amounted to EUR 33.0 million, or 40.5 % below the prior
year’s level (EUR 55.5 million). Income taxes totalled EUR 4.1 million following EUR 9.8 million in the
abbreviated 2014 fiscal year and led to a net profit for the period (profit after taxes) of EUR 28.9 million,
or one-third lower than the net profit for the abbreviated 2014 fiscal year of EUR 45.7 million.
3.2. Segment reporting
Segment reporting contained in the consolidated financial statements is conducted in accordance with
IFRS 8 „Operating Segments“ based on the internal alignment of strategic business segments. The
segment information provided represents the information to be reported to DEMIRE’s Executive Board.
Segment information is presented on a net amount basis net of consolidation effects.
After the strategic realignment in 2013, the Group was divided into the segments of Investments,
Asset Management, Core Portfolio and Corporate Functions. Since fiscal year 2015, asset management
for third parties is no longer reported separately. Trailing income and expenses from the Austrian
subsidiary are included in the retitled segment Corporate Functions/Others. The subgroup of Fair Value
REIT is shown as a separate segment as at December 31, 2015.
The Investments segment includes information on the legacy portfolio originating before the
realignment and the respective project holdings consisting of investments in Eastern Europe and the
Black Sea Region.
The Core Portfolio segment consists of the newly established and acquired domestic and foreign
subsidiaries focussed on commercial real estate for the entrepreneurial Mittelstand in Germany. Our
primary aim with these investment properties is their sustainable management. These properties are
held for rental income generation and value appreciation. The internal asset, property and facility
management activities, expanded in 2015, were also allocated to the Core Portfolio segment.
The Corporate Functions/Others segment mainly contains DEMIRE Deutsche Mittelstand Real
Estate AG’s activities in areas, such as risk management, finance and controlling, financing, legal, IT
and compliance, that are related to its function as the Group holding and service provider for the
subsidiaries.
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01/04/201431/12/2014
Investments
Core portfolio
Fair Value REIT
Corporate Functions/Others
Total segments
1,848
67,322
0
3,905
73,075
EURk
Segment revenues
Segmentexpenses
-7,780
-3,419
0
-3,442
-14,641
EBIT by segment
-5,932
63,903
0
463
58,434
Net profit/loss for
the period
-6,282
53,231
0
-1,242
45,707
1,390
73,397
0
-2,144
72,643
693
0
0
0
693
Investments
Core portfolio
Fair Value REIT
Corporate Functions/Others
Total segments
Significant noncash items
Impairment losses
01/01/201531/12/2015
EURk
Segment revenues
4,607
98,362
0
2,057
105,026
Segmentexpenses
-8,626
-28,119
0
-9,541
-46,286
EBIT by segment
-4,019
70,243
0
-7,484
58,740
Net profit/loss for
the period
-5,760
52,466
0
-17,833
28,873
Significant noncash items
4,165
-51,628
0
2,825
-44,638
Impairment losses
1,435
792
0
619
2,846
A segment analysis illustrates the vital importance of the relatively new Core Portfolio segment, which
was substantially strengthened in the 2015 fiscal year to reflect the Company’s strategic realignment.
We will continue to expand this segment in the years ahead. The legacy portfolio, contained in
the Investments segment, is up for sale and continues to lose importance. As of 2015, the Asset
Management segment, which was reported separately until the abbreviated 2014 fiscal year, has now
been combined with the Corporate Functions segment to comprise the Corporate Functions/Others
segment. The reporting for the abbreviated 2014 fiscal year was adjusted accordingly. Because the
initial consolidation of Fair Value REIT took place as at December 31, 2015, the new subsidiary did not
impact earnings in the reporting year.
The DEMIRE Group’s segment revenues increased more than 40 % during the 2015 fiscal year and
reached a total of EUR 105.0 million (abbreviated 2014 fiscal year: EUR 73.1 million). This increase
resulted primarily from the Core Portfolio segment that ended the year with EUR 98.4 million compared
to EUR 67.3 million in the abbreviated 2014 fiscal year. This rise is a result of the portfolio’s expansion
and the fair value adjustments during the reporting period that were recognised through profit or loss
in the amount of EUR 18.5 million (abbreviated 2014 fiscal year: EUR 63.3 million) and profits in the
amount of EUR 33.2 million (abbreviated 2014 fiscal year: EUR 0 million) originating from a purchase
below market value.
» Economic report
Segment expenses increased accordingly from EUR 14.6 million in the abbreviated 2014 fiscal year
to EUR 46.3 million in the 2015 fiscal year. The main reason for this rise was the higher expenses in
the Core Portfolio segment of EUR 28.1 million in 2015 (abbreviated 2014 fiscal year: EUR 3.4 million)
resulting from the portfolio’s expansion. Segment-related consulting expenses related to acquisitions
and operational growth had a particularly strong impact in this respect. Expenses in the Investments
segment increased only slightly to EUR 8.6 million in comparison to the abbreviated 2014 fiscal year
(EUR 7.8 million). Consulting and legal costs as well as accounting and audit costs in connection with
capital increases and the acquisition of the interests in Fair Value REIT-AG affected the Corporate
Functions/Others segment in the 2015 fiscal year and amounted to EUR 9.5 million in 2015 compared
to EUR 3.4 million in the prior year.
The EBIT by segment amounted to EUR 58.7 million and was slightly above the previous year’s figure
(previous reporting period: EUR 58.4 million). The Core Portfolio segment contributed EUR 70.2 million
(abbreviated 2014 fiscal year: EUR 63.9 million), whereby this amount was affected by fair value
adjustments of EUR 18.5 million (abbreviated 2014 fiscal year: EUR 63.6 million) and profits originating
from a purchase below market value of EUR 33.2 million (abbreviated 2014 fiscal year: EUR 0.0 million).
The Investments segment recorded a negative EBIT of EUR -4.0 million due to sales of real estate
companies and one property but was still considerably better than the EBIT in the prior year (abbreviated
2014 fiscal year: EUR -5.9 million). After a slightly positive EBIT in the abbreviated 2014 fiscal year of
EUR 0.5 million, the EBIT of the Corporate Functions/Others segment amounted to EUR -7.5 million
because of extraordinary expenses related to the Company’s growth.
The net profit for the period of the Core Portfolio segment reached EUR 52.5 million after EUR 53.2 million
in the prior year’s reporting period. The pro rata interest result of EUR -13.2 million (abbreviated 2014
fiscal year: EUR -1.2 million) and income taxes in the amount of EUR 4.6 million (abbreviated 2014
fiscal year: EUR 9.5 million) reduced profits. The Investment segment ended the year with a loss after
taxes of EUR 5.8 million compared to EUR 6.3 million in the prior year. The Corporate Functions/Others
segment generated a loss of EUR 17.8 million compared to EUR 1.2 million in the prior year, which was
mainly the result of growth-related expenses, a net interest result of EUR -10.7 million (abbreviated
2014 fiscal year: EUR -1.5 million) and income taxes of EUR 0.4 million (abbreviated 2014 fiscal year:
EUR 0.2 million).
Non-cash items in the Investments segment included impairments of the OXELTON loan in the amount
of EUR 3.1 million and the reversal of currency translation reserves in the amount of EUR 3.8 million,
as well as positive effects from debt forgiveness of EUR 1.2 million and the write-up on OXELTON
of EUR 0.6 million. The Core Portfolio segment benefited from fair value adjustments on property
holdings amounting to EUR 18.5 million and the profit of EUR 33.2 million originating from a purchase
below market value. The profit/loss of the Corporate Functions/Others segment in the 2015 fiscal year
was positively impacted by the profit/loss from investments accounted for using the equity method
totalling EUR 1.5 million.
Impairment expenses rose sharply in the reporting period in comparison to the abbreviated 2014 fiscal
year due to the streamlining of the legacy portfolio.
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3.3. Net assets and capital structure
Overview of core real estate portfolio
In the course of rapid growth, DEMIRE’s real estate portfolio nearly tripled in the 2015 fiscal year. At
the end of the reporting period, the Group held 181 commercial properties with rentable building
space totalling almost 1.1 million m². Except for real estate inventory, these properties are located
exclusively in Germany, mostly in larger cities and mainly in the catchment areas of economically
strong metropolitan regions.
In 2015, DEMIRE began to expand the portfolio – which consisted almost exclusively of office properties
– to include retail and logistic properties in order to diversify its risk. This shift of focus was reinforced
through the initial consolidation of Fair Value REIT, whose sub-portfolio properties’ primary use is
retail.
Real estate experts assessed the market value of real estate holdings (investment properties and noncurrent assets held for sale) at EUR 928.1 million as at the reporting date. With a weighted remaining
lease term of 5.4 years, the contractual rents of these properties amounted to EUR 72.2 million as at
the reporting date. This corresponds to a yield weighted occupancy rate of 87.2 % of the potential rent
at full occupancy of EUR 82.7 million.
Measured by potential rent at full occupancy, office properties, at about 65.6 %, made up the largest
share of the portfolio at the end of 2015. Around 19.8 % of the potential rent can be achieved with retail
use, approximately 8.7 % with logistic properties and 5.9 % through other uses.
Selected information from the consolidated balance sheet
Assets
EURk
31/12/2015
31/12/2014
Assets
948,597
350,926
Total current assets
Total non-current assets
71,343
22,086
Non-current assets, held for sale
13,005
0
1,032,945
373,012
Total assets
The total assets of the DEMIRE Group as at December 31, 2015, increased more than 175 % to
EUR 1,032.9 million (December 31, 2014: EUR 373.0 million). This sharp increase was mainly the result
of the real estate group’s acquisition-related growth. The expansion in total assets resulting from the
initial consolidation of Fair Value REIT amounted to EUR 337.3 million.
As at December 31, 2015, there was a rise in non-current assets of EUR 597.7 million to a total of
EUR 948.6 million (December 31, 2014: EUR 350.9 million). The majority of this increase originated
from investment properties, which grew by EUR 582.0 million. Investment properties included an
amount of EUR 287.8 million from the Fair Value REIT subgroup. In addition, the acquisition of Fair
Value REIT resulted in goodwill of EUR 6.8 million, including deferred taxes. Additions in 2015 included
the property holdings of Glockenhofcenter Objektgesellschaft mbH, Hanse-Center Objektgesellschaft
mbH, an additional building from Margarethenhof in Schwerin, Gutenberg-Galerie and Logistikpark
in Leipzig, the T6 portfolio and properties owned by Fair Value REIT. The properties in Worms and
» Economic report
Halle-Peissen qualified as investment properties for the first time due to their positive cash flows as
a strategic prerequisite and were reclassified from real estate inventory in the course of 2015 and
measured in accordance with IAS 40.
The increase in non-current assets also resulted from a down payment for the purchase of KurfürstenGalerie in Kassel in the amount of EUR 9.7 million. This amount was transferred in January 2016 as was
the non-current portion of a receivable settlement credit for the terminated interest in an investment
fund in the Fair Value subgroup in the amount of EUR 9.0 million.
As at December 31, 2015, the DEMIRE Group’s current assets had grown by EUR 49.2 million to
EUR 71.3 million (December 31, 2014: EUR 22.1 million). Of this amount, EUR 21.7 million were
attributed to current assets belonging to Fair Value REIT.
The main contributor to this increase was the rise in financial receivables and other financial assets
of EUR 25.1 million. A total of EUR 14.4 million of this rise stemmed from a receivable from the
reassignment of 2014/2019 corporate bonds against the seller of the interests in Germavest Real Estate
S.à.r.l. Temporary partial assignment of the purchase price was carried out with these corporate bonds
in connection with the acquisition’s completion on October 30, 2015. Prior to the balance sheet date,
these corporate bonds were released by a cash payment of the purchase price by means of funds from
the Signal Capital loan. At a total of EUR 4.2 million, the increase also resulted from loans receivable
against minority shareholders of the newly acquired property companies.
The second largest source of the rise in current assets was cash and cash equivalents, which grew by
EUR 24.1 million to EUR 28.5 million (December 31, 2014: EUR 4.4 million). This item consists of cash
on hand and credit balances at financial institutions. Of this amount, EUR 16.0 million is attributed to
cash and cash equivalents of the Fair Value REIT subgroup.
Trade accounts receivable and other receivables increased by EUR 5.1 million to EUR 14.4 million
as at December 31, 2015 (December 31, 2014: EUR 9.3 million). Of this amount, EUR 5.7 million is
attributable to the Fair Value REIT subgroup, including a purchase price receivable for a property
sold (EUR 1.4 million) and the current portion of the receivable settlement credit for the terminated
shareholding in an associated company (EUR 1.0 million). A partial amount of EUR 3.0 million relating
to a security deposit under a loan agreement, was released again by the end of the first quarter of
2016. This item also includes purchase price receivables from the sale of Ukrainian companies in the
amount of EUR 2.9 million.
The assets held for sale as at December 31, 2015, of EUR 13.0 million include the properties of the Fair
Value REIT subgroup Radevormwald (EUR 11.1 million) and Tornesch (EUR 0.7 million), which were sold
at their carrying amounts after the balance sheet date as well as real estate from the DEMIRE subgroup
in Halle-Peissen (EUR 0.7 million) and the property Am Bahnhof 3 (EUR 0.6 million).
51
52
Equity and liabilities
eurk
31/12/2015
31/12/2014
230,697
51,684
34,205
2,945
264,902
54,629
696,746
258,124
71,297
60,259
Equity attributable to parent company shareholders
Interests of non-controlling shareholders
Total equity
Liabilities
Total non-current liabilities
Total current liabilities
Total liabilities
Total liabilities and equity
768,043
318,383
1,032,945
373,012
The equity of the DEMIRE Group increased by around EUR 210.3 million to EUR 264.9 million as at
December 31, 2015 (previous year: EUR 54.6 million).
With a total of EUR 125.1 million, the largest portion of the increase was due to capital increases against
contribution in kind. The first-time consolidation of Fair Value REIT-AG contributed EUR 117.4 million,
of which EUR 26.2 million is attributable to minority shareholders of Fair Value REIT-AG. A total of EUR
11.2 million resulted from the cash capital increase and EUR 0.2 million resulted from the conversion
of convertible bonds. The costs related to capital increases of EUR 3.3 million were recognised directly
in equity and offset against reserves. A portion of EUR 14.2 million of the mandatory convertible
bond issued in May 2015 was classified as equity. An amount of EUR 1.0 million was recognised in
equity resulting from the 1.0 million stock options issued under the stock option programme based
on the authorization of the Extraordinary General Meeting on March 6, 2015. The change in currency
translation reserves of EUR 3.4 million mainly reflected the disposal of real estate companies. At EUR
28.9 million, the increase in the Group’s equity resulted exclusively from the net profit/loss for the
period.
The equity ratio as at December 31, 2015, amounted to 25.6 % compared to a level of 14.6 % on
December 31, 2014. It is important to note that the interests of non-controlling shareholders in the
subsidiaries of Fair Value REIT-AG in the amount of EUR 61.2 million are recognised under non-current
liabilities pursuant to IFRS, even though they are treated as equity under the provisions of the REIT Act
(REITG).
The interests of non-controlling shareholders in the Group have increased by an amount of
EUR 31.3 million from EUR 2.9 million to EUR 34.2 million mainly as a result of the first-time
consolidation of Fair Value REIT with a non-controlling interest in the voting rights of 22.3 % and
through the minority shareholders of the acquired property companies. Assuming the corresponding
accounting and inclusion of minority interests of the Fair Value REIT subgroup, the Group’s equity as at
December 31, 2015 would increase to EUR 326.1 million or 31.6 % of the Group’s total assets.
As at December 31, 2015, the DEMIRE Group’s non-current liabilities increased to EUR 696.7 million
(December 31, 2014: EUR 258.1 million). The largest portion, or EUR 608.8 million (December 31, 2014:
EUR 248.1 million), was attributed to non-current financial debt. Of this amount, a nominal
» Economic report
EUR 100 million (carrying amount: EUR 97.0 million) resulted from a corporate bond 2014/2019,
EUR 29.3 million from a loan for Logistikpark GmbH, EUR 26.7 million was related to a loan for the
acquisition of T6 (Germavest) and EUR 10.2 million came from the remaining convertible bonds.
Furthermore, there was a promissory note loan from Deutsche Bank of EUR 142.5 million, a loan from
Landesbank Baden-Württemberg of EUR 32.9 million, the HFS bond of EUR 27.2 million and the loan
liabilities of EUR 96.7 million that were assumed as a result of the acquisition of Germavest in the 2015
fiscal year.
Non-current financial debt of EUR 125.5 million was recognised due to the initial consolidation of Fair
Value REIT. Together with the current portion of EUR 18.5 million, the total consists of loans from WIB
Westdeutsche Immobilienbank AG in the total amount of EUR 18.6 million, loans from Unicredit Bank
AG that together amount to EUR 52.1 million, loans from DG Hypothekenbank AG of EUR 32.2 million
and loans from Bayerische Beamten Lebensversicherung a.G. amounting to a total of EUR 22.1 million.
Furthermore, as already mentioned, Fair Value REIT recognised non-controlling interests of third
parties in subsidiaries in the amount of EUR 61.2 million under non-current liabilities.
As at December 31, 2015, the DEMIRE Group’s current liabilities grew to EUR 71.3 million following
their level of EUR 60.3 million as at December 31, 2014. The first-time consolidation of Fair Value REIT
resulted in a rise in current liabilities of EUR 18.5 million as at December 31, 2015.
Most of this rise was recorded in current financial debt, which accounted for EUR 46.4 million
(December 31, 2014: EUR 47.6 million) at the Group level. Of this amount, EUR 18.5 million was
attributable to the financial debt of Fair Value REIT. In January of 2015, Fair Value REIT-AG issued
a convertible bond with a five-year maturity that had a carrying amount of EUR 8.7 million as at
December 31, 2015. The bond was recognised under current financial debt due to the extraordinary
termination by convertible bond holders and repayment in February 2016 as a result of the change in
control.
Total financial liabilities of EUR 655.2 million (December 31, 2014: EUR 295.7 million) included liabilities
to financial institutions in the amount of EUR 207.1 million (December 31, 2014: EUR 50.8 million).
As at the reporting date, financial debt with variable interest rate agreements amounted to
EUR 196.0 million.
As at December 31, 2015, trade payables and other liabilities rose to EUR 19.9 million (December 31, 2014:
EUR 11.5 million) as a result of business expansion. Of this amount, EUR 9.2 million were recognised
under trade payables (December 31, 2014: EUR 5.3 million) and EUR 10.7 million (December 31, 2014:
EUR 6.2 million) under other liabilities. The first-time consolidation of Fair Value REIT led to a rise in
trade payables as at December 31, 2015 of EUR 2.7 million and other liabilities of EUR 4.0 million.
The DEMIRE Group’s total liabilities as at the December 31, 2015 reporting date amounted to
EUR 768.0 million (December 31, 2014: EUR 318.4 million).
53
54
3.4. Loan-to-Value (LTV) ratio
The DEMIRE Group’s Loan-to-Value (LTV) debt ratio is defined as the ratio of net financial debt to the
carrying amount of investment properties and non-current assets held for sale. This ratio developed
as follows:
eur million
31/12/2015
31/12/2014
655.2
295.7
28.5
4.4
Net debt
626.8
291.3
Fair value of investment properties and
non-current assets held for sale
928.1
333.1
67.5
87.4
Financial debt
LTV in %
The improvement in the LTV ratio in comparison to the prior year is partly the result of the first-time
consolidation of Fair Value REIT.
The maturities of the existing loan agreements are broadly spread. In the next three years, follow-up
financing will be required to only a small extent. Liquidity requirements for follow-up financing and
repayments (excluding convertible bonds) in the next few years are as follows:
Maturity
2016
2017
2018
2019
From 2020
EUR million
36.2
46.9
55.1
293.1
195.0
3.5. Financial position and liquidity
Financial management
The financial management of the DEMIRE Group is executed in accordance with the guidelines adopted
by the Executive Board. This applies to both the liquidity management and financing. The centralised
liquidity analysis helps to optimise cash flows. The primary goal is securing liquidity for the entire
Group and maintaining the Group’s financial independence. In doing so, the focus is on long-term
and stable financing solutions that sustainably and positively support our business development. All
financial obligations and the related credit clauses (financial covenants) were met in the reporting
period. Financial covenants are customary and require compliance with financial ratios, such as the
equity ratio, interest service cover ratio (ISRC) and the debt service cover ratio (DSCR).
Providing the Supervisory Board with regular information on the financial situation is an integral part of
DEMIRE’s risk management system. The principles and objectives of capital management and control
are presented in the notes to the consolidated financial statement
» Economic report
Selected information from the consolidated statement of cash flows
eurk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
Cash flow from operating activities
10,815
-3,986
Cash flow from investing activities
-29,165
-255,206
Cash flow from financing activities
42,420
259,634
Net change in cash and cash equivalents
24,070
442
Cash and cash equivalents at the end of the period
28,467
4,397
Cash flow development reflects the investments made to expand the real estate holdings. A detailed
consolidated statement of cash flows is presented in the notes.
Cash flow from operating activities in fiscal year 2015 in the amount of EUR 10.8 million was
EUR 14.8 million higher than its level of EUR -4.0 million in the abbreviated 2014 fiscal year. Cash flow
from operating activities is derived from the Group’s profit/loss before taxes (EBT) of EUR 33.0 million
and is primarily adjusted for the interest result of EUR -25.7 million (abbreviated 2014 fiscal year:
EUR -2.9 million), the profit/loss from the fair value adjustments of investment properties in accordance
with IAS 40 in the amount of EUR 18.5 million (abbreviated 2014 fiscal year: EUR 63.6 million), and the
profit of EUR 33.2 million originating from a purchase below market value (abbreviated 2014 fiscal year:
EUR 0.0 million). The acquisitions in the abbreviated 2014 fiscal year offered considerable appreciation
potential due to the acquisition circumstances, whereas most of the property acquired during the fiscal
year was acquired at a purchase price equal to its fair value. The majority of the valuation gains in the
amount of EUR 6.6 million are attributed to the Logistikpark property in Leipzig. Negative goodwill of
EUR 33.2 million resulting from the acquisition of Germavest Real Estate S.à.r.l. was recognised in the
reporting year through profit or loss under other operating income.
Cash flow from investing activities in the reporting year amounted to a net EUR -29.2 million compared
to EUR -255.2 million in the abbreviated 2014 fiscal year. The reason for this decline, despite the
threefold rise in business volume, was the use of capital increases against contribution in kind as the
predominant source of acquisition funding. Cash in the amount of EUR 35.6 million was utilised for
the acquisition of investment properties. Purchases included a property in Schwerin, the acquisition
of Germavest Real Estate S.à.r.l. and the T6 portfolio, the cash component of the payment for the
acquisitions of Logistikpark Leipzig GmbH, Hanse-Center Immobilienobjektgesellschaft GmbH, and
Glockenhofcenter Immobilienobjektgesellschaft GmbH.
The consolidation of Fair Value REIT as at December 31, 2015, resulted in a cash inflow for the Group
of EUR 16.0 million. Down payments of EUR 11.3 million were made, among others, for the purchase of
Kurfürsten-Galerie in Kassel, which was completed in January 2016. Proceeds of EUR 1.7 million were
received from the sale of property holdings.
Cash flow from financing activities in the 2015 reporting year amounted to EUR 42.4 million compared
to EUR 259.6 million in the abbreviated 2014 fiscal year. The Company received proceeds of
EUR 11.2 million from the cash capital increase executed in mid-July 2015. Expenses of EUR 1.5 million
were paid out in relation to the capital increases for acquisitions and the takeover of the interest in
Fair Value REIT-AG executed in the fiscal year. Proceeds from the assumption of liabilities totalled
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56
EUR 54.7 million in the reporting year (abbreviated 2014 fiscal year: EUR 261.7 million) and included
in particular the increase in the 2014/2019 corporate bond in the amount of EUR 36.0 million, the
assumption of a loan from Signal Capital for EUR 32.0 million to acquire an interest in Germavest
and make a down payment for Kurfürsten-Galerie in Kassel, the real estate loan from Volksbank
Mittweida amounting to EUR 4.6 million for the purchase of a property in Schwerin and a loan from
Hypo NOE Group Bank AG in the amount of EUR 11.5 million. The proceeds were used to pay interest of
EUR 21.3 million (abbreviated 2014 fiscal year: EUR 1.6 million) and repay financial debt in the amount
of EUR 36.7 million (abbreviated 2014 fiscal year: EUR 0.5 million).
The net change in cash and cash equivalents was EUR 24.1 million (abbreviated 2014 fiscal year:
EUR 0.4 million). Cash and cash equivalents at the end of the reporting period grew to EUR 28.5 million
from EUR 4.4 million at the end of the previous fiscal year.
Throughout the entire reporting period, the DEMIRE Group was always in a position to fully meet its
payment obligations.
4. Employees
As part of the Group’s growth, particularly through the establishment and development of in-house
property, asset and facility management activities, the DEMIRE Group quantitatively and qualitatively
strengthened its activities in the 2015 fiscal year by adding experienced professionals. Important
strategic and organisational functions were taken out of the hands of external service providers
and brought back into the Company. The Company’s flat hierarchies offer motivated and dedicated
employees a wide range of challenging activities requiring accountability. Quick decision-making and
direct, open communication at all levels promote constructive cooperation.
DEMIRE’s market- and performance-based compensation system helps keep managers and employees
focussed on achieving corporate and divisional objectives and gives them the opportunity to participate
in the Company’s performance on the capital market. Remuneration is reviewed and adjusted within
the Company regularly.
As at December 31, 2015, the Group employed 54 staff members, excluding the members of the
Executive Board (December 31, 2014: 8), in the consolidated and non-consolidated group companies.
» Economic report | Changes in the composition of the governing bodies
5. Comparison of forecasts with actual business development
The legacy portfolio was trimmed significantly and streamlined during the year, although the objective
of a complete sale has not yet been reached. Although this had a negative effect on earnings, it did
improve the Group’s risk position.
In 2015, growth took priority over profits. DEMIRE’s forecast for fiscal year 2015 was based on the
expectation that the real estate portfolio would double. By the year’s end, the portfolio had achieved
close to a threefold increase. This led to significantly higher rental income than expected (EUR 33 million)
of EUR 43.3 million.
The targeted rise in the portfolio’s value was also achieved. The expectations with respect to the
occupancy rate and reduction in operating costs, on the other hand, were slightly too ambitious. It was
however pointed out that the benefits may only materialise in the course of the following year, which
would be 2016.
Additional expenses were an unavoidable factor of the accompanying growth opportunities. Accordingly,
earnings before interest and taxes (EBIT), excluding fair value adjustments, did not quite meet the
original target. In 2015, EBIT reached EUR 7.1 million compared to the originally communicated target
of an EBIT in the low double-digit millions.
DEMIRE made it a top priority to secure liquidity because the level of cash flow generated from
operations would not be sufficient enough to fund this growth. Various measures for raising equity
and debt were used to achieve this aim and even operating cash flow turned positive as a result of the
growth in rentals.
The targeted strong improvement in net asset value was also achieved. In absolute figures, NAV grew
fourfold and increased around 20 % per share.
6. General statement concerning the Group’s business performance and financial position
In the three years since initiating the Group’s realignment and focus on the German commercial real
estate market in the summer of 2013, DEMIRE has already succeeded in building a property portfolio
with a market value of nearly EUR 930 million and has thus created the basis for a favourable business
development going forward. Taking into account the acquisition of Kurfürsten-Galerie in Kassel in
January 2016, the DEMIRE Group’s contractual annual rental income form investment properties has
grown to roughly EUR 75.2 million and has transformed DEMIRE into one of the leading holders of
commercial real estate in Germany.
III. Changes in the composition of the governing bodies
Dr. Dirk Hoffmann resigned from the Supervisory Board with effect from December 31, 2014.
Dr. Peter Maser, an attorney at Deloitte Legal Rechtsanwaltsgesellschaft mbH, Stuttgart, was appointed
to the Supervisory Board by a resolution of the District Court of Frankfurt/Main on January 12, 2015.
The Extraordinary General Meeting on March 6, 2015, elected Dr. Peter Maser as a member of the
Supervisory Board until the Annual General Meeting that discharges the members of the Supervisory
Board for the fiscal year ended December 31, 2015.
57
58
Effective February 1, 2016, Mr. Markus Drews was appointed as a member of the Company’s Executive
Board for a term of three years until January 31, 2019. Mr. Schaich will continue to remain the sole
director of Fair Value REIT-AG.
IV. Remuneration report
The following remuneration report summarises the basic principles of the Executive Board and
Supervisory Board remuneration systems:
1. Remuneration of the Executive Board
The Supervisory Board determines the appropriate remuneration for the Executive Board. The criteria
for the appropriateness of the total remuneration are based on the responsibilities and performance of
the Executive Board member, the position of the Company, as well as the sustainability of the Company’s
development. Overall remuneration may not exceed the usual remuneration without specific reasons.
Hereby, the Supervisory Board takes into consideration the relationship between the remuneration of
Executive Board members and the remuneration of senior management and the overall workforce,
and also the development over time. The Supervisory Board establishes the definition of who is to be
included in the categories of senior management and relevant workforce. The total remuneration of
Executive Board members consists primarily of a fixed remuneration component as well as a variable
remuneration component with short- and long-term incentive components (performance bonus).
Remuneration can be adjusted as at January 1 of each calendar year.
The variable remuneration of Executive Board members is divided into a bonus for the prior fiscal year
and a bonus based on multi-year factors. The bonus awarded is 50 % based on individual performance
targets with the remaining 50 % based on uniformly defined performance targets for the entire
Executive Board. The achievement of the agreed targets is 40 % derived from the target achievement
of the prior year and 60 % from the average target achievement of the prior three fiscal years.
Executive Board members also each received 400,000 stock options in April 2015 under the 2015 stock
option programme that was resolved at the Annual General Meeting on March 6, 2015. By introducing
this stock option programme, the Executive Board members who shape and implement the corporate
strategy and, therefore, are largely responsible for the Company’s development, have an opportunity
to share in the risks and rewards of DEMIRE. For the details on the stock option programme, please
refer to the notes. An identical package of 400,000 virtual stock options based on the existing stock
option programme was agreed for the third member of the Executive Board, Mr. Frank Schaich, who
was appointed effective as at February 1, 2016.
In the event a majority of the Company’s voting rights are purchased by a third party, the Executive Board
members have the extraordinary right to terminate their contracts. If this extraordinary termination
right is exercised or the contract is terminated by mutual agreement within a period of six months
after the change of control, the resigning Executive Board members will receive the existing contractual
entitlements for the remainder of their term of office in the form of a one-time compensation payment
based on the compensation paid in the last full calendar year before his resignation and not exceeding
the amount of two years’ compensation.
» Changes in the composition of the governing bodies | Remuneration report
Executive Board members are also entitled to the customary contractual benefits in kind and other
fringe benefits. These benefits may include the provision of a company vehicle, the reimbursement of
expenses and travel costs, payments to a retirement fund, the conclusion of a directors’ and officers’
liability insurance policy (D&O insurance), continued remuneration in the case of illness or accident as
well as death benefits.
Employment contracts contain a competition clause forbidding Executive Board members from
founding or purchasing a company competing with either the Company or an affiliated company, to
directly or indirectly acquire an interest in such a company, or be active in or for such a company during
the term of the employment contract without a resolution of the Supervisory Board approving such
activities. Moreover, Executive Board members are also prohibited from working within the Federal
Republic of German for a company dependently, as a freelancer or in the employment of a company
in any other manner whose business activities come in contact with the statutory corporate purpose
of the Company for the duration of one year after the termination of the employment contract. During
the time of the prohibition of the activities mentioned above, the Executive Board member is also
forbidden from establishing, purchasing or being directly or indirectly involved in such a company. The
employment contract also includes the pledge to treat all of the information disclosed confidentially
and not allow third parties access to business records or use this information for his or her own benefit
or the benefit of others.
The variable and fixed components of the remuneration of Executive Board members have maximum
limits in terms of absolute value. Remuneration in excess of the amount intended for the remaining
term of the employment contract will not be granted.
Executive Board remuneration also covers executive board and executive functions at the DEMIRE
Group’s direct and indirect subsidiaries.
Existing employment contracts
(1) Hon.-Prof. Andreas Steyer
The fixed component of remuneration is paid out monthly in the form of a basic salary. The Executive
Board member has a fixed-term employment contract.
The information for the reporting period is based on the contract concluded after March 2013. Hon.
Prof. Andreas Steyer is entitled to the customary contractual benefits in kind and fringe benefits. These
benefits include the provision of a company vehicle, the reimbursement of expenses and travel costs,
the conclusion of a directors’ and officers’ liability insurance policy (D&O insurance), and continued
payments in the case of illness or an accident, and death benefits.
Hon. Prof. Andreas Steyer receives variable, performance-based remuneration, which consists of
an annual bonus and a multi-year bonus with long-term incentive. Annual bonus and multi-year
bonus are determined based on the achievement of objectives which are set by the Supervisory
Board in agreement with the Executive Board member. The targets for achieving the annual bonus
are determined in agreement with the Supervisory Board and based on the Group’s situation at the
beginning of each fiscal year.
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Hon.-Prof. Andreas Steyer receives a time-proportionate entitlement to a multi-year bonus if the
performance period for the determination of the multi-year bonus has existed for twenty-four months.
If the employment contract of Hon.-Prof. Andreas Steyer ends prematurely due to a change in control;
he is entitled to the fixed salary and variable remuneration for the remaining term of his appointment,
each based on the amount of his remuneration in the last full calendar year preceding his departure.
The maximum amount of this remuneration cannot exceed two-years’ remuneration.
On December 2, 2015, the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG extended
the contract of Hon.-Prof. Andreas Steyer by three years and, therefore, his Executive Board contract,
which expired at the end of February 2016, was amended and extended through February 2019.
The contract will extend automatically by the length of the period Mr. Steyer has been reappointed as
an Executive Board member of the Company. In addition to a basic annual salary of EUR 250,000.00,
he receives an annual performance bonus of up to 50 % of his annual basic salary.
(2) Mr. Markus Drews
The Supervisory Board appointed Mr. Markus Drews as an ordinary member of the Company’s Executive
Board by resolution on December 1, 2014. His employment began on January 1, 2015.
The fixed salary component plus a temporary expense allowance to cover the higher expense of
establishing and maintaining an additional residence near the Company’s registered offices is paid
monthly as part of his basic salary. The Executive Board member has a fixed-term employment contract.
The information for the reporting period is based on the contract concluded after January 2015.
Mr. Markus Drews is entitled to the customary contractual benefits in kind and fringe benefits. These
benefits include the provision of a company vehicle, the reimbursement of expenses and travel costs,
contributions to premiums for public or suitable private health insurance and long-term care insurance
with the statutory employer’s contribution, contributions to a pension fund, the continuation of the
existing directors’ and officers’ liability insurance policy (D&O insurance), an accident and disability
insurance policy under group accident insurance and continued remuneration in the case of illness or
an accident, and death benefits.
Mr. Markus Drews receives variable, performance-based remuneration that consists of an annual
bonus. Two-thirds of the annual bonus is based on the achievement of objectives that are set by the
Supervisory Board in agreement with the Executive Board member. One-third of the annual bonus is set
at the discretion of the Supervisory Board and based on a proper account of all relevant circumstances.
If the employment contract of Mr. Markus Drews ends prematurely due to a change in control, he is
entitled to a severance payment to the amount of his capitalised base salary for the subsequent sixmonth period.
On December 2, 2015, the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG amended
the contract of Mr. Drews. The contract now extends automatically by the length of time he was
reappointed as an Executive Board member of the Company. In addition to a basic annual salary of
EUR 230,000.00, he receives an annual performance bonus of up to EUR 125,000.00 per year.
» Remuneration report
(3) Mr. Frank Schaich
On January 29, 2016, the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG concluded
a three-year contract with Mr. Frank Schaich, as a new Executive Board member, effective as of
February 1, 2016. In addition to a basic annual salary of EUR 230,000.00, he receives an annual
performance bonus of up to EUR 125,000.00 per year.
The value of benefits granted in the fiscal year (in EUR).
Benefits granted
Hon.-Prof Andreas Steyer
EUR
Speaker of the Executive Board, since March 5, 2013
Abbr. FY 2014
Basic salary
Fringe benefits
Total
FY 2015
FY 2015 (Min)
FY 2015 (Max)
161,250.03
226,250.04
226,250.04
226,250.04
14,095.17
18,993.56
18,993.56
18,993.56
175,345.20
245,243.60
245,243.60
245,243.60
One-year variable remuneration
0.00
81,667.00
0.00
81,667.00
Multi-year variable remuneration
0.00
107,500.00
0.00
107,500.00
Stock options
0.00
221,940.00
0.00
221,940.00
175,345.20
656,350.60
245,243.60
656,350.60
2,752.83
3,754.24
3,754.24
3,754.24
178,098.03
660,104.84
248,997.84
660,104.84
Total
Pension expenses
Total remuneration
Benefits granted
Markus Drews
EUR
Member, since December 1, 2014
Abbr. FY 2014
Basic salary
Fringe benefits
Total
FY 2015
FY 2015 (Min)
FY 2015 (Max)
18,000.00
180,000.00
180,000.00
180,000.00
0.00
32,686.75
32,686.75
32,686.75
18,000.00
212,686.75
212,686.75
212,686.75
0.00
100,000.00
0.00
100,000.00
0.00
24,000.00
0.00
24,000.00
Stock options
0.00
221,940.00
0.00
221,940.00
18,000.00
558,626.75
212,686.75
558,626.75
0.00
2,036.53
2,036.53
2,036.53
18,000.00
560,663.28
214,723.28
560,663.28
Total
Pension expenses
Total remuneration
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The value of benefits paid in the fiscal year (in EUR).
Benefits paid
Hon.-Prof Andreas Steyer
Markus Drews
EUR
Speaker of the Executive Board,
since March 5, 2013
Member, since December 1, 2014
FY 2015
FY 2015
Basic salary
Fringe benefits
Total
Abbr. FY 2014
226,250.04
161,250.03
Abbr. FY 2014
180,000.00
18,000.00
18,993.56
14,095.17
32,686.75
0.00
245,243.60
175,345.20
212,686.75
18,000.00
0.00
0.00
0.00
0.00
140,833.00
0.00
24,000.00
0.00
Total
386,076.60
175,345.20
236,686.75
0.00
Pension expenses
Total remuneration
3,754.24
2,752.83
2,036.53
0.00
389,830.84
178,098.03
238,723.28
18,000.00
2. Remuneration of the Supervisory Board
The amount of Supervisory Board remuneration is determined by the Annual General Meeting and
is governed by Section 16 („Compensation“) in the Articles of Association. The last agreed levels of
remuneration remain valid until the Annual General Meeting resolves a revision of these levels. Each
member of the Supervisory Board receives a fixed salary payable annually of EUR 45,000.00. The
Supervisory Board’s chairman receives three times the level of base salary and the deputy chairman
receives twice the level of base salary. Supervisory Board members, who were not in office for a
complete fiscal year, receive compensation in accordance with the duration of their membership. The
absolute level of remuneration was adjusted in the reporting year based on a resolution of the Annual
General Meeting on August 28, 2015.
The Company also reimburses Supervisory Board members for expenses incurred in the exercise of
their Supervisory Board duties, VAT payable on their remuneration and expenses insofar as these will
be charged separately.
For more information, we refer to the relevant comments in the notes.
V. Subsequent events
The following events of significant importance to the net assets, financial position and results of
operations occurred subsequent to the end of the fiscal year:
On January 13, 2016, the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG completed the
acquisition signed in July 2015 of a 94.9 % stake in Kurfürster Immobilien GmbH, Kassel. The property,
located in the centre of Hesse’s third largest city, has a total space of approximately 21,000 m² and
is used mainly for retailing purposes. This property contains one of Kassel’s largest parking garages
with around 600 parking spaces. Contractual net rental income, excluding utilities, of the commercial
property, which in 1991 was the first shopping mall in Kassel, amounts to roughly EUR 3.9 million
annually. Tenants include a hotel, a casino, retailers, offices and professional practices. With this
» Remuneration report | Subsequent events
transaction, DEMIRE is strengthening its engagement in retail property – the Company’s third asset
class alongside office and logistics. With the completion of this transaction, all of the acquisitions and
transactions announced in 2015 were completed, including the takeover of Fair Value REIT-AG.
Based on a purchase agreement dated January 29, 2016, the property located in Tornesch at WillyMeyer-Str. 3-5 was sold by Fair Value REIT. The purchase price of EUR 0.7 million is 10 % higher than
the expert appraised market value as per December 31, 2015 of EUR 0.6 million and was paid in full on
March 16, 2016.
The creditors of the convertible bond issued by Fair Value REIT-AG on January 19, 2015 with a principal
amount of EUR 8.46 million yielding 4.5 % p.a. and maturing as at January 19, 2020 have requested
by declaration on February 9, 2016 and in accordance with the bonds terms and conditions, early
redemption in the amount of 103 % of the nominal value plus accrued interest as of the effective
date (February 19, 2016) as a result of the change of control at Fair Value REIT-AG which occurred
on December 21, 2015. The corresponding amount of around EUR 8.75 million was paid on time on
February 19, 2016. The refinancing of the redemption amount was made through two loans. The loan
issued to Fair Value REIT-AG from CapitalBank – GRAWE Group AG, Graz, is a bullet loan with a term of
three years until February 15, 2019 in the amount of EUR 7.0 million, less a processing fee of 1 %, at a
variable interest rate of 3-month EURIBOR plus a margin of 400 basis points and a minimum interest
of 4.0 % p.a. About 25 % of this loan is secured by mortgages with the remainder secured by pledged
shares and other assets. The loan from Stadt-Sparkasse Langenfeld issued to Fair Value REIT-AG is a
mortgage-secured loan of EUR 2.0 million with a term until March 30, 2020, bearing 1.69 % interest
p.a., which will initially be redeemed at 3 % p.a.
The Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG appointed Mr. Frank Schaich,
sole Executive Board member of Fair Value REIT-AG, as a new member of the Executive Board of DEMIRE
Deutsche Mittelstand Real Estate AG for a term of three years from February 1, 2016 through January
31, 2019. An executive board contract was concluded with Mr. Schaich under the condition precedent
that he terminate his existing employment contract with Fair Value REIT-AG for the duration of his term
of office. On March 1, 2016, the Supervisory Board of Fair Value REIT-AG extended the current Executive
Board term of Mr. Schaich until February 31, 2019 and terminated his existing employment contract by
mutual agreement effective the end of February 29, 2016.
In mid-February 2016, DEMIRE Deutsche Mittelstand Real Estate AG acquired F. Krüger Immobilien
GmbH in Bremen as part of an asset deal. By way of a business transfer to DEMIRE Immobilien
Management GmbH (DIM), a wholly owned subsidiary of DEMIRE, the in-house property management
activities of the Group were strengthened further. All employees were transferred to DIM and will
continue to work at the new DIM location in Bremen.
With the purchase agreement dated March 4, 2016, a subsidiary of Fair Value REIT sold the nursing
home property in Radevormwald at a carrying amount of EUR 11.1 million. The transfer of ownership,
benefits and obligations took place after the payment of the purchase price on March 31, 2016.
In the first quarter of 2016, a nominal amount of EUR 14.4 million of the remaining bonds of the
2014/2019 corporate bond was placed with investors.
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In 2016 until the release of this Annual Report, a total of 14,937 convertible bonds were converted
into no-par value share of DEMIRE Deutsche Mittelstand Real Estate AG, which represented a notional
interest in the share capital of roughly 0.03 % as at April 30, 2016.
In early April 2016, DEMIRE AG concluded a contract with Südwestbank AG for a one-year credit line
until March 30, 2017 in the amount of EUR 5.0 million less a 3 % processing fee at a variable interest
rate of 3-month EURIBOR plus a margin of 250 basis points and a minimum interest rate of 2.5 % p.a.,
which can be utilised at various times and prolonged annually. At the end of April 2016, DEMIRE AG
concluded a contract with Baader Bank AG for a one-year credit line until April 30, 2017 in the amount
of EUR 5.0 million at a fixed interest rate of 5.0 % p.a. that can be drawn upon as needed. This credit
line can be extended annually. In the case of both credit lines, collateral will be provided through
pledged account balances and interests in subsidiaries upon the credit lines’ utilisation, which has not
yet occurred. These credit lines are expected to be fully exhausted by no later than mid-June 2016 so
that a portion of the HFS bond can be redeemed in a corresponding amount at that time. This will allow
for a reduction in the net interest expense and will strengthen DEMIRE’s profitability.
These credit lines are expected to be fully exhausted by no later than mid-June 2016 so that a portion of
the HFS bond can be redeemed in a corresponding amount at that time. This will allow for a reduction
in the net interest expense and will strengthen DEMIRE’s profitability.
VI. Report on Opportunities, Risks and Outlook
1. 1. Opportunities report
1.1. Macroeconomic and industry opportunities
The macroeconomic and industry environment is currently favourable for DEMIRE and continues to
offer good opportunities for building a value-enhancing real estate portfolio. Germany is exhibiting
robust and sound economic development and, as a result, demand for commercial space remains
steady. DEMIRE intends to take full advantage of the favourable environment to further increase
its enterprise value by carefully and professionally selecting new properties and employing active
property, asset and facility management with respect to its existing properties.
1.2. Business opportunities
The strong growth experienced in recent years, particularly from the takeover of the majority interest
in Fair Value REIT-AG, has given DEMIRE the necessary size to conclude framework agreements with
national utility suppliers for basic utilities and lower its costs through volume purchases and better
service conditions. The Company’s greater size will have the added advantage that the costs of the daily
property management activities will decline thanks to the in-house management of properties through
the asset, property and facility management division.
The gradual insourcing of property management and the streamlining and harmonisation of the
processes and IT structure that accompany this process also result in economies of scale for Company.
This can reduce the costs passed on to tenants and improve the direct relationship with these tenants.
If this leads to an increase in lease terms and a higher probability of lease renewal, then turnover and
vacancy rates will decline.
» Subsequent events | Report on Opportunities, Risks and Outlook
1.3. Financial opportunities
DEMIRE intends to use the low interest rate environment to refinance the existing debt that has
comparably high interest rates at more favourable terms and thus reduce the average interest on debt.
At the same time, the opportunities to financing real estate acquisitions continue to be good and, in the
Company’s opinion, will remain so for the foreseeable future.
1.4. Opportunities from the merger with Fair Value REIT-AG
With the acquisition of 77.7 % of the voting rights of Fair Value REIT-AG at the end of fiscal year
2015, DEMIRE significantly expanded its shareholder base and market capitalisation and as a result
considerably raised its visibility among listed real estate companies.
The acquisition of Fair Value REIT-AG opens up additional growth potential because Fair Value REIT and
its specialised acquisition strategy provide the Company with an established platform for investments
in closed-end funds.
1.5. Summary assessment of DEMIRE’s opportunities
DEMIRE has created the essential foundation to be sustainably successful as one of the leading holders
of German commercial real estate with a balanced risk-reward profile and attractive cash flows. With the
gradual improvement in the Company’s equity position, DEMIRE intends to offer shareholders not only
an opportunity for medium-term value appreciation but also steady dividends. Therefore, the Executive
Board believes the chances are strong that DEMIRE will increase its business volume and profits in the
years to come.
2. Risk report
The decision in 2013 to shift the Company’s focus towards German commercial real estate has been
successfully implemented over the past two fiscal years through a number of strategic investments
and, particularly in fiscal year 2015, through the acquisition of more than three-quarters of the voting
rights of Fair Value REIT-AG. This had a significantly positive effect on the risk profile of the DEMIRE
Group.
2.1. Risk management system
The objective of the risk management system is to ensure the Company’s lasting viability, monitor the
compliance of the risk strategy derived from the corporate strategy, control of the Company through
the appropriate or necessary actions and as well as monitor and optimise the performance risk ratio.
Risk management covers all organisational rules and activities and the periodic and Group-wide
implementation of the risk strategy. The Group-wide risk management system covers all of the DEMIRE
Group’s affiliated companies included in the consolidated financial statements, except Fair Value, which
was not consolidated until the year’s end. Fair Value REIT-AG possess its own risk management system.
The focus of risk management is securing liquidity, identifying and limiting risks from acquisitions,
divestitures and management of the existing portfolio. To carry out these tasks, both the Executive
Board and the managing directors of Group companies are supported by qualified external service
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providers and meet with these providers regularly to discuss controlling issues. Given the DEMIRE
Group’s flat organisational structure, the Executive Board is directly involved in all major decisions
and also monitors whether the measures agreed are implemented and adhered to limit risk. The flat
hierarchy allows a risk management system with comparatively simple structures.
The risk management process is documented in a risk management handbook that is reviewed regularly
and revised as necessary. A risk catalogue lists all of the significant risks DEMIRE is subject to or could
be subject to in the future.
The Supervisory Board is regularly informed of the development of the business, the performance of
investments and the status and further development of the risk management system; thereby making
the control activities of the Supervisory Board an essential element of the risk management system.
New risks that pose a major risk and any sharply negative changes in existing risks are reported to the
Supervisory Board on an ad hoc basis.
2.2. Risks
The text below gives an overview of the major risks for the DEMIRE Group. For risk quantification,
particularly with respect to the impact of interest rate changes, please refer to the sensitivity analysis
in the notes to the consolidated financial statements under the sections „Investment Properties“ and
„Financial Instruments“.
2.2.1. Macroeconomic, market and sector risks
The DEMIRE Group’s portfolio is exposed to a wide variety of macroeconomic, market and industryrelated risks:
DEMIRE Group’s main business activity of German commercial real estate is exposed to general the risk
of declines in value. The broad diversification of activities in the past two years through acquisitions of
commercial real estate in almost all German states has helped lead to a situation where changes in a
specific location have only a small impact on the overall portfolio. The macroeconomic environment,
the level of interest rates and positive general business expectations all indicate that the German
market is currently in a positive state overall.
The effects on existing investments in Eastern Europe and the Black Sea Region from the murky
economic environment and political unrest in the Ukraine have even increased in the reporting year.¬
Conducting transactions in these countries is expected to remain difficult for the foreseeable future.
The risks those markets pose to this portion of the DEMIRE Group’s property portfolio will remain high;
however, in view of the legacy portfolio’s smaller size, the risk will be lower than in prior years. The
prices achievable in a sale could fall below the current carrying amounts at the time of the sale.
2.2.2. Financial risk
2.2.2.1. Liquidity risk
Liquidity management serves to guarantee the Group’s solvency at all times. Based on conservative
assumptions, the funds necessary for the Group’s operational management are planned and dispersed
at the level of the group companies and the parent company. At the level of the respective property
holding companies, liquidity is affected by revenues from real estate less management, administrative
and financing costs and at the company level, by proceeds from Group companies in the form of
dividends, profit distributions and withdrawals.
» Report on Opportunities, Risks and Outlook
There is a risk that there may be a time during the year in which the Company does not have access to
sufficient liquidity to meet its current obligations at all times.
As at the reporting date, however, the funds available and the cash flows planned for the year 2016
are sufficient for the current needs of the ongoing operations. There is the risk that the refinancing
of maturing financial debt may not be possible or possible only at conditions that are less favourable
than planned.
Additional liquidity requirements may arise from events beyond the DEMIRE’s operational control,
especially from the operational and other risks referred to below.
2.2.2.2. Currency risk
There is no foreign currency risk for the existing portfolio of commercial real estate in Germany because
all transactions are conducted in euros.
The existing investments outside of Germany are subject to translation risk until the point of their
complete disposal. Potential currency risk related to subsidiaries in Ukraine, which had the euro
designated as their functional currency in the 2013/2014 fiscal year, will arise only at the time of their
disposal.
Projects in Eastern Europe and the Black Sea Region are handled in the same currency when possible
and feasible.
2.2.2.3. Interest rate risk
To finance its German commercial real estate, the DEMIRE Group uses debt financing to a degree
customary for the industry. This financing consists of both variable and fixed-interest loans as well as
listed instruments that contain options to convert the instruments into shares in the Company or Fair
Value REIT-AG.
In the case of variable interest loans, an increase in interest rates places additional pressure on
the Group. As at the balance sheet date, there were fixed interest rate agreements in the amount
of EUR 459.2 million and variable interest rate agreements of around EUR 196.0 million. In order to
reduce the risk of interest rate increases for the financial liabilities bearing variable interest rates,
interest rate hedges were concluded in the form of interest rate swaps, which at the balance sheet date
amounted to EUR 36.1 million.
The majority of the remaining investments in Eastern Europe and the Black Sea Region are financed by
equity. Any financing taken for these investments is recognised at the project level.
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Since low interest rates prompt transaction prices for real estate to rise, the interest rate level also has
an impact on the purchase prices of newly acquired real estate. Interest rates also play an important
role in the appraisal of investment properties.
The evaluation of interest rate policy is carried out at regular intervals and in close coordination with
the Supervisory Board.
2.2.3. Operating risk
The operating risk associated with investments in German commercial real estate is fundamentally
different from those for the remaining projects in Eastern Europe and the Black Sea Region.
Commercial real estate in Germany is mainly subject to classic rental risk, whereas valuation risk is less
likely in view of the current favourable market conditions. In Eastern Europe and the Black Sea Region,
the key risks are valuation, disposal and long-term liquidity risk.
2.2.3.1. Rental and property management risks
There are risks of rent reductions, delinquent rents and space vacancies. In addition, index-based rent
increases may not always be made for the full amount, be delayed or not enforced at all. Furthermore,
in addition to revenue shortfalls, rental-related costs may arise (e.g. tenant incentives, expansion costs,
payments of moving expenses, or rent-free periods), which cannot be passed on to the tenant.
There is also the risk that unexpected costs may arise for maintenance and repair work or adjustments
to the property to meet current requirements.
At the time of preparing this report, no material rental risks existed based on the tenant structure that
could have a direct effect on the Group’s profitability
2.2.3.2. Valuation risk
The investment properties contained in the consolidated financial statements are recognised at their
fair values as defined by IAS 40. These fair values are based on appraisals conducted by independent
appraisers at least once annually. Various factors play a role in these appraisals: For one, circumstances
such as the socioeconomic development of the respective location and the development of rental
periods, rents and vacancy rates, as well as qualitative factors such as location and the property’s
condition are used as parameters in the assessment.
During subsequent valuations of investment properties in the course of quarterly, half-year or annual
financial statements, negative changes may occur to the fair values of the respective properties as a
result of possible changes in the internal and external parameters used in the valuation report. This
would then result in impairments, which could have an effect on the consolidated profit/loss and,
in some cases, a significantly negative effect. This would not, however, have a direct impact on the
Group’s liquidity.
2.2.4. Other risks
2.2.4.1. Legal risk
Risks to DEMIRE’s business model result primarily from changes in the legal environment. In addition,
DEMIRE may be liable for legacy issues not yet known such as contaminated sites, environmental
contamination, harmful building materials or be sued for non-compliance with building code
requirements.
Other legal risks can generally arise from a variety of conflicts, such as those in relation to rentals or
personnel matters.¬ Rental disputes are also a part of the everyday life of real estate companies, which
must be handled professionally.
Legal risks can also result from portfolio investments in countries with comparatively less stable legal
systems. Given the advanced stage of the Company’s withdrawal from Eastern Europe and the Black
Sea Region, these risks have come down even further in comparison to previous fiscal years.
2.2.4.2. Tax risk
DEMIRE’s tax structure is complex because of the different taxable entities (tax groups and taxation at
the level of individual companies) and various legal forms existing within the Group.
Restrictions that are relevant to DEMIRE include restrictions on what is referred to as the interest
barrier as well as those for minimum taxation and extended trade tax deductions for property holdings.
The Company believes that there are currently no other material tax risks beyond those for which it has
already recognised provisions. Tax risk may arise in the context of tax audits or routine changes in the
existing portfolio or as part of the portfolio’s expansion, particularly through purchases of interests in
the companies holding properties.
2.2.4.3. Personnel risk
The DEMIRE Group could lose Executive Board members or employees and may not be in a position to
replace them with sufficiently qualified personnel.
2.2.4.4. IT risk
The IT systems of DEMIRE, its subsidiaries and their service providers may lose important data
irretrievably or may be the victim of unauthorised access from outside parties. Both of these events
could cause business disruptions and costs and may ultimately lead to financial losses.
2.2.5. General acquisition and integration risk
Each purchase is audited in detail by DEMIRE using external specialists for legal, commercial and
technical due diligence. Nevertheless, it cannot be ruled out that objectives associated with an
acquisition, such as synergies, may not be realised, only partially realised or realised at a later date.
Actual developments may, therefore, differ from the estimates made at the time of acquisition.
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2.2.5.1. Risk related to the integration of Fair Value REIT-AG
The successful integration of Fair Value REIT-AG into the DEMIRE Group should generate the planned
synergy and scale effects. There is a risk that these effects will not occur as expected or to a lesser extent
than expected. In addition, the costs for the integration may be higher than expected. Following the
takeover, DEMIRE’s business performance is now strongly linked to the business performance of Fair
Value, particularly from the valuation of its real estate portfolios. Fair Value REIT’s property portfolio
may develop differently than reported in Fair Value REIT-AG’s past annual and quarterly reports. In
addition, Fair Value’s retention of its REIT status is dependent on certain business conditions, such as
tax exclusion. There is a risk that this status cannot be maintained. These risks may have an adverse
effect on DEMIRE’s net assets, financial position and results of operations.
2.2.5.2. Risk related to the REIT status of Fair Value REIT-AG
Fair Value REIT-AG, in its capacity as a German Real Estate Investment Trust-Aktiengesellschaft (REIT),
must meet certain legal requirements to maintain its REIT status and benefit from the tax exemptions
provided to REITs. These requirements include:
■The share’s admission to trading on a regulated market
■
Restriction of property trading and non-property-related services in return for payment
■
Compliance with the free float ratio of a minimum 15 %
■
Compliance with the maximum direct interest of less than 10 % of the shares or voting rights
■
Minimum equity of 45 % of the value of immovable assets
■
A proportion of immovable assets of at least 75 % of total assets
■
At least 75 % of gross income must be derived from immovable assets
■
Distribution of at least 90 % of the net profit under commercial law by the end of the following fiscal year
As a REIT, Fair Value REIT-AG is exempt from corporate and trade taxes. If Fair Value REIT-AG does
not consistently meet these requirements, this may result in penalties and, in the case of repeated
infringement, the possible loss of tax exemptions and the withdrawal of its status as a German REIT.
This could eventually lead to tax payments and considerable liquidity outflows. If the REIT status was
lost, this could also lead to damage claims from shareholders of Fair Value REIT-AG.
2.3. Internal control and risk management system in the financial reporting process
The internal control and risk management system in the financial reporting and consolidation
processes represents one of the cornerstones of the Group risk management. This system comprises
all accounting-related processes and all risks and controls with respect to accounting.
Their purpose is to achieve the following:
■
Safeguard the efficiency of operations and the protection of assets
■
Guarantee the accuracy and reliability of internal and external accounting
■Ensure compliance with applicable legal provisions, in particular, the compliance of the
consolidated financial statements and the combined management report with current
standards
DEMIRE Deutsche Mittelstand Real Estate AG, as the legal parent company, prepares the consolidated
financial statements. Before this process, the bookkeeping and preparation of the Group companies’
annual financial statements are carried out mostly by external specialists.
The required monthly reports and the preparation of the annual financial statements are fully and
promptly communicated and internally monitored. Each process is based on a detailed timetable.¬ For
risk management purposes, the plausibility, accuracy and completeness of postings are monitored and
reviewed by the Group’s own employees. The employees involved in this process meet the qualitative
requirements and are trained periodically. The two-man rule is an important control principle used in
this process.
Other essential tools include:
■Uniform accounting policies by selecting one external service provider for the majority of
Group companies
■The clear separation of duties and assignment of responsibilities between the internal and
external departments involved in the accounting process
■The use of external specialists to the extent necessary, for example, to provide an expert
opinion on the market value of real estate
Together with our external service providers, new laws, accounting standards and other official
pronouncements are continuously analysed for their relevance and their impact on the annual
and consolidated financial statements and the combined management report. The Group makes
adjustments to Group accounting policies when necessary. In fiscal year 2015, this occurred to the
extent required under new accounting provisions.
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To ensure the adequacy of the accounting and the relevant overall presentation of the consolidated
and annual financial statements, including the combined management report, the following measures
and controls are regularly implemented, evaluated and further developed in a structured process with
together our service providers:
■The identification and analysis of key risk and control areas
■
Monitoring and plausibility checks to monitor the processes and their results at the level of the
Executive Board and the operational units
■Preventative control measures in finance and accounting and of the operational business
processes essential for accounting
■
Measures to ensure the orderly, complete and timely computerised processing of accountingrelated issues and data
■
Measures for monitoring of accounting-related internal control and risk management system
and the steps necessary to eliminate any control weaknesses¬
2.4. Overall assessment of the risk situation
The risk situation of the DEMIRE Group and the Company has fundamentally improved in the reporting
period aided greatly by the acquisitions. The larger overall portfolio led to a significant strengthening of
the revenue basis and cash flows. The portfolio’s risk structure was altered by regional diversification
and the first purchases of retail and logistic real estate. The Company also clearly improved its visibility
on the capital market through the issue of equity and debt capital. This will make it easier and less
expensive for the Company to raise capital in the future.
At the same time, the remaining risks related to the legacy portfolio have been further reduced
to a comparatively low level due to the divestments of the reporting year. The Executive Board is
currently not aware of any risks that could threaten the Company’s continued existence. The Company
is confident that it will be able to take advantage of the opportunities and challenges that present
themselves going forward, without having to take on any undue high risk.
3. Report on outlook
3.1. Positive economic environment
DEMIRE Mittelstand Real Estate AG expects the macroeconomic environment in 2016 to continue to
prove favourable for companies in the real estate industry. Germany’s macroeconomic development
appears to be robust amid a moderately growing world economy, with growth in gross domestic
product expected by most economic experts to be between one and two percent. At the same time,
general expectations are that private consumption will remain an important driver of overall economic
development in 2016 based on expectations that employment will stay at a high level and the lack of
saving incentives due to continued low interest rates. The positive outlook for the real estate industry is
also underscored by the expectation for continued low interest rates in 2016, even if there is a reversal
in interest rate policies in the course of the year.
3.2. Sector momentum continues
DEMIRE business performance is driven more by the developments on the real estate markets it
operates in than overall economic developments.
The transaction market for German commercial real estate has exhibited significant and consistent
growth since the year 2009. Real estate prices have been increasing at a faster rate than rents. Analysts
at the bulwiengesa Institute determined that although the total yield of German properties reached
a record high in 2015, the majority of property yields are the result of property price increases. The
institute suggests a decoupling of the rental and investment markets. This is associated with falling net
initial yields and a higher risk in the capital market. At the same time, institutional investor demand
remains high due to persistently low interest rates. This is particularly true for institutional investors
such as pension funds and insurance companies.
Therefore prices for commercial real estate are generally expected to continue to rise. However, it
would not be surprising if the price curve flattened. According to an analysis of the consulting firm
Ernst & Young, transaction volumes are not expected to reach the previous year’s level because of the
numerous acquisitions carried out that year.
The rents of office and retail properties are expected to remain stable or slightly increase in 2016 based
on the outlook for stronger demand for these properties due to the positive economic situation, high
and rising employment and the expected continued increase in private consumption.
A slight decline in the vacancy rates of office property is expected in 2016 based on the persistently
low volume of new construction in this segment. The real estate service provider Jones Lang LaSalle
expects achievable rents to increase by another 2 percent in 2016 – a level also expected for secondary
locations.
JLL real estate analysts also expect the German market for warehouse and logistic space to continue
to perform well in 2016 due to the favourable economic environment. The quarterly logistics indicator
of the Kiel Institute for the World Economy (IfW) declined slightly at the end of 2015 but remained on
a moderate upward trend.
3.3. Anticipated development of FFO and LTV, the most important key performance indicators
Forecasts for the German economy and commercial real estate market continue to be positive, which,
in turn, is also positive for DEMIRE Deutsche Mittelstand Real Estate AG’s business model. Forecasts are
projecting good performance for secondary locations in Germany, which are DEMIRE’s primary focus and
the reason the Company expects continued positive business performance. The Company’s performance
will be supported by the commercial properties and real estate portfolios purchased in 2015, which will
contribute to rental income for a full 12-month period for the first time and significantly strengthen
the revenue of the Core Portfolio segment and the DEMIRE Group. The purchase of Kurfürsten-Galerie,
which was already agreed in 2015, was completed in January 2016 and together with the result of Fair
Value REIT will also make a positive contribution to the results of operations.
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Because the portfolios acquired in 2015 will contribute to revenue and profits for a full 12-month period
for the first time in fiscal year 2016 and the Kurfürstengalerie shopping centre in Kassel was added to
the Company’s portfolio in the first quarter of 2016, DEMIRE expects a significant increase in income
from property rentals in 2016, which are expected to amount to around EUR 75 million. Active, internal
asset, property and facility management should lead to a rise in occupancy rates in the current fiscal
year and a further drop in current operating costs.
Based on this rental income, DEMIRE expects a significant improvement in operating cash flow, that is,
operating profit adjusted for valuation effects and special items (EPRA earnings or FFO). The Executive
Board expects FFO before non-controlling interests in earnings to amount to just below EUR 20 million.
FFO after non-controlling interests is expected at around EUR 15 million under the assumption of an
unchanged interest of non-controlling shareholders in net profit. This corresponds to a FFO of roughly
EUR 0.30 per share currently outstanding.
DEMIRE intends to reduce the average interest rate on financial debt of currently just above 5.0 % p.a. to
a range of 4.0 % p.a. to 4.5 % p.a. by the end of 2016. In addition, the debt ratio (LTV) should be scaled
back to 60% of the property values according to IAS 40 . DEMIRE expects to achieve this target gradually
by means of refinancing, sales of non-strategic real estate and through more equity to back acquisitions,
should any occur.
If these expectations are met, the Company’s net asset value (NAV) should continue to rise. The extent
of the rise is difficult to forecast because the NAV is dependent upon the valuation result of investment
properties.
3.4. General statement on the expected performance of the Group
Forecasts for the German economy and commercial real estate market continue to be positive, which,
in turn, is also positive for DEMIRE Deutsche Mittelstand Real Estate AG’s business model. Forecasts
are also projecting good performance for secondary locations in Germany, which are DEMIRE’s primary
focus.
Given this environment, DEMIRE anticipates positive business performance, which, as described,
is expected to be reflected by a sharp rise in rental income, a significant increase in FFO and an
appreciation in enterprise value as far as this can be projected.
VII. Acquisition-related information
1. Composition of subscribed capital
a.) On December 31, 2015
On December 31, 2015, the Company had fully paid-up subscribed capital in the amount of
EUR 49,292,285.00 divided into 49,292,285 no-par value bearer shares with a notional interest in share
capital of EUR 1.00. The Group held 5,000 of these shares. A total of 13,125 no-par value bearer shares
were not registered at the commercial register until the end of January 2016. The shares of DEMIRE
Deutsche Mittelstand Real Estate AG have been admitted to the regulated market (General Standard
segment) of the Frankfurt Stock Exchange for trading.
The increase in share capital resulted from conversions of 2013/2018 convertible bonds, a cash capital
increase and capital increases against contribution in kind related to newly acquired properties.
» Report on Opportunities, Risks and Outlook | Acquisition-related information
An increase of 226,800 shares resulted from conversions from the 2013/2018 convertible bond. The
Company’s capital is conditionally increased following the exercise of conversion rights from the
2013/2018 convertible bond and the issue of 226,800 new shares from Conditional Capital I/2013
by up to EUR 6,309,025.00, divided into a maximum of 6,309,025 no-par value bearer shares with a
notional interest of EUR 1.00. The original number of convertible bonds was 11,300,000. Following the
conversion of a further 226,800 bonds in the reporting period, the remaining number of conversions
rights totalled 10,661,700. The conditional capital increase serves to grant subscription and/or
conversion rights to the holders of bonds with warrants and/or convertible bonds that were issued
based on the authorisation of the Annual General Meeting of October 23, 2013.
Based on the authorisation of the Annual General Meeting on October 15, 2014 and upon the
registration in the commercial register on January 22, 2015, the Company’s share capital was increased
from authorised capital against contribution in kind on one occasion in an amount of EUR 5,633,710
excluding shareholder subscription rights for the purchases of Hanse-Center Objektgesellschaft mbH
und Glockenhofcenter Objektgesellschaft mbH. Alpine Real Estate GmbH was admitted to subscribe
to the new shares in return for a contribution in kind to DEMIRE Deutsche Mittelstand Real Estate AG
consisting of Alpine’s 94.9 % interest in Hanse-Center Objektgesellschaft mbH, 94.9 % of the interest in
Glockenhofcenter Objektgesellschaft mbH and a receivable against Hanse-Center Objektgesellschaft.
In the context of the capital increase, each new DEMIRE Deutsche Mittelstand Real Estate AG share was
assigned a value of EUR 1.75.
Based on the authorisations of the Annual General Meetings of October 15, 2014 and March 6, 2015,
the Company’s share capital was increased against contribution in kind and excluding shareholder
subscription rights in a total amount of EUR 2,182,567.00. Ketom AG, Switzerland, was admitted to
subscribe to the new shares in return for a contribution in kind consisting of a 94 % interest in the
project company Sihlegg Investments Holding GmbH, Switzerland, that owns Gutenberg-Galerie, and
all claims from a shareholder loan granted to the project company by Ketom AG. A value of EUR 4.028
per DEMIRE Deutsche Mittelstand Real Estate AG share was used to determine the amount of the
capital increase and the number of new DEMIRE shares to be issued. The capital increase was recorded
in the commercial register on May 27, 2015.
On May 19, 2015, with the approval of the Supervisory Board, the Company’s share capital was increased
from authorised capital once by EUR 2,541,149.00 against a mixed contribution in kind and excluding
shareholders’ subscription rights. M1 Beteiligungs GmbH, Berlin, was admitted to subscribe to the new
shares in return for a contribution in kind consisting of a 94 % interest in Logistikpark Leipzig GmbH.
A value of EUR 5.84 per DEMIRE Deutsche Mittelstand Real Estate AG share was used to determine the
amount of the capital increase and the number of new DEMIRE Deutsche Mittelstand Real Estate AG
shares to be issued. The capital increase was recorded in the commercial register on July 1, 2015.
The Company’s share capital was increased on July 14, 2015 by EUR 2,474,152 through a 10 % cash
capital increase. The 2,474,152 new no-par value ordinary bearer shares (no-par value shares) were
largely subscribed to by the institutional investor Wecken & Cie., Basel, Switzerland, in the context
of a private placement. The issue price of the new shares was EUR 4.51 per share. The new shares
are entitled to dividends as of January 1, 2015. The capital increase was recorded in the commercial
register on July 14, 2015.
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On October 14, 2015, the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG made a
voluntary public takeover offer to the shareholders of Fair Value REIT-AG in which they could exchange
their shares for newly created shares of DEMIRE Deutsche Mittelstand Real Estate AG. The share
exchange took place at a ratio of two DEMIRE Deutsche Mittelstand Real Estate AG shares for one Fair
Value REIT-AG share. The exchange took legal effect on December 21, 2015 with the registration of the
capital increase in the commercial register in Frankfurt/Main. DEMIRE Deutsche Mittelstand Real Estate
AG’s takeover offer was accepted by 77.7 % of the Fair Value REIT-AG shareholders. A total of 10,963,878
Fair Value REIT-AG shares of the full total of 14,110,323 shares were tendered for exchange during the
initial acceptance period and the additional acceptance period that extended until December 3, 2015.
The prerequisites were created for the issue of 21,927,756 new shares at the Extraordinary General
Meeting on September 14, 2015, by a resolution for a capital increase for up to 30,761,646 no-par value
bearer shares with a value of EUR 30,761,646.00
b) Development after December 31, 2015
Prior to the publication of the Annual Report, a total of 14,937 conversion rights were exercised creating
14,937 new no-par value bearer shares.
2. Restrictions on voting rights and the transfer of shares
There are no restrictions on voting rights or the transfer of shares.
3. Direct or indirect interests in capital that exceed 10 % of the voting rights
On December 31, 2015, the following DEMIRE Deutsche Mittelstand Real Estate AG shareholders held
interests in the Company representing more than 10 % of the voting rights:
Mr. Klaus Wecken held a total of 12.91 % of the shares through his interest in Wecken & Cie, Basel,
Switzerland.
Mr. Rolf Elgeti, as general partner of Obotritia Capital KGaA, held a total of 12.67 % of the shares through
interests in Jägersteig Beteiligungs GmbH, Försterweg Beteiligungs GmbH and Obotritia Beteiligungs
GmbH.
On December 31, 2015, the Company was not aware of any further notifications of direct or indirect
interests that exceed 10 % of the voting rights.
b.) Development after December 31, 2015
At the time of the report’s publication, the Company had received no further notifications of direct or
indirect interests that exceed 10 % of the voting rights.
4. Holders of shares endowed with special rights conferring power of control
Such shares do not exist.
5. Type of voting right control when employees hold an interest in share capital and do not
exercise their control rights directly
Such interests do not exist.
» Acquisition-related information
6. Legal regulations and provisions of the Articles of Association governing the appointment
and replacement of members of the Executive Board and amendments to the Articles of
Association
6.1. Appointment and replacement of Executive Board members
Pursuant to Section 84 AktG, Executive Board members are appointed by the Supervisory Board for a
term of no more than five years. Repeat appointments are permissible. The Executive Board of DEMIRE
Deutsche Mittelstand Real Estate AG consists of one or more persons. The number of Executive Board
members is stipulated by the Supervisory Board. The Supervisory Board decides on the appointment,
revocation of appointment and the conclusion, modification and termination of employment contracts
to be concluded with Executive Board members. The Supervisory Board is authorised to appoint
chairpersons and deputy chairpersons and deputy members to the Executive Board
6.2. Amendments to Articles of Association
Changes to the Articles of Association require a resolution of the Annual General Meeting pursuant
to Section 179 para. 1 AktG, which requires a majority of three-fourths of the capital represented in
the voting, unless specified otherwise in the Articles of Association.¬ However, where an amendment
relates to a change in the purpose of the Company, the Articles of Association may only specify a larger
majority. Section 20 para. 1 of DEMIRE Deutsche Mittelstand Real Estate AG’s Articles of Association
makes use of the option to deviate therefrom pursuant to Section 179 para. 2 AktG and provides that
resolutions can generally be passed by a simple majority vote and, if a capital majority is required, by
a simple capital majority unless mandatory provisions require otherwise. The Supervisory Board is
authorised to resolve amendments to the Articles of Association that related to their wording only. The
Supervisory Board is also authorised to amend the wording of Section 5 of the Articles of Association
with respect to the amount and composition of the share capital in correspondence to the scope of
capital increases from authorised capital.
7. Authority of Executive Board to issue and repurchase shares
7.1. Authorised Capitall
Authorised Capital I/2014 was utilised through the issue of 5,633,710 new no-par value bearer share to
purchase an interests in Hanse-Center Objektgesellschaft mbH and Glockenhofcenter Objektgesellschaft
mbH in the amount of EUR 5,633,710.00 and the issue of 1,430,615 new no-par value bearer shares for
the partial purchase of Gutenberg-Galerie in the amount of EUR 1,430,615.00.
Based on the resolution of the Extraordinary General Meeting of March 6, 2015, with the consent of the
Supervisory Board the Executive Board is authorised until March 5, 2020, to increase the Company’s
share capital by up to EUR 8,522,290.00 (Authorised Capital I/2015) through the issue of up to 8,552,290
new no-par value bearer shares in the form of no-par value shares with a notional interest of EUR 1.00
each against contribution in cash and/or in kind once or several times in partial amounts. Shareholders
are generally entitled to subscription rights. With the Supervisory Board’s consent, the Executive Board
is authorised to exclude shareholder subscription rights for fractional amounts, cash capital increases
of up to 10 % of the share capital at an issue price that is not substantially below the stock market price,
meet the obligations of warrant or conversion rights, issue shares to employees and execute capital
increases against contribution in kind.
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Authorised Capital I/2015 was utilised through the issue of 751,952 new no-par value bearer share to
partially purchase Gutenberg-Galerie in the amount of EUR 751,952.00, the issue of 2,541,149 new nopar value bearer shares for the purchase of an interest in Logistikpark Leipzig GmbH in the amount of
EUR 2,541,149.00 and through the issue of 2,474,152 new no-par value bearer shares in the context of
a 10 % cash capital increase in the amount of EUR 2,474,152.00.
Based on the resolution of the Annual General Meeting of August 28, 2015, Authorised Capital I/2015
amounting to EUR 2,785,037.00 and the related provisions of Section 6 of the Articles of Association
(Authorised Capital) were cancelled. The Executive Board was authorised, with the Supervisory Board’s
consent, to increase the share capital by up to EUR 13,675,702.00 (Authorised Capital II/2015) by
issuing up to 13,675,702 new no-par value bearer shares in the form of no-par value shares against
contribution in cash and/or in kind once or several times in partial amounts until August 27, 2020.
Shareholders are generally entitled to subscription rights. The new shares can also be subscribed for by
one or several banks with the obligation to offer the new shares to shareholders. With the Supervisory
Board’s consent, the Executive Board is authorised to exclude shareholder subscription rights for
fractional amounts, cash capital increases of up to 10 % of the share capital at an issue price that is not
substantially below the stock market price, meet the obligations of warrants or conversion rights, issue
shares to employees and execute capital increases against contribution in kind.
Based on the resolution of the Extraordinary General Meeting of September 14, 2015, with the
Supervisory Board’s consent, the Executive Board was authorised to increase the Company’s share
capital by up to EUR 7,069,272.00 (Authorised Capital III/2015) by issuing up to 7,069,272 new no-par
value ordinary bearer shares (no-par value shares) against contributions in cash and/or in kind once
or several times until September 13, 2020. Shareholders are generally entitled to subscription rights.
The new shares can also be subscribed for by one or several banks with the obligation to offer the new
shares to shareholders. With the Supervisory Board’s consent, the Executive Board is authorised to
exclude shareholder subscription rights for fractional amounts, cash capital increases of up to 10 %
of the share capital at an issue price that is not substantially below the stock market price, meet the
obligations of warrants or conversion rights, issue shares to employees and execute capital increases
against contribution in kind.
There were no changes prior to the publication of the Annual Report compared to the information
published on December 31, 2015.
7.2. Conditional capital
Following the exercise of conversion rights from the 2013/2018 convertible bond and the issue of 638,300
new shares from conditional capital, the Company’s capital is conditionally increased in an amount of
up to EUR 6,322,150.00, divided into a maximum of 6,322,150 no-par value bearer shares (Conditional
Capital I/2013). The conditional capital increase serves to grant sub¬scription and/or conversion rights
to the holders of bonds with warrants and/or convertible bonds based on the authorisation of the
Annual General Meeting of October 23, 2013. A total of 13,125 shares arising from the exercise of
conversions rights were not yet recorded in the commercial register on December 31, 2015.
Based on the resolution of the Extraordinary General Meeting of March 6, 2015, the Company’s share
capital was conditionally increased by up to EUR 2,434,105.00 divided into up to 2,434,105 no-par value
bearer shares (Conditional Capital I/2015). The conditional capital increase serves to grant subscription
and/or conversion rights to the holders of bonds with warrants and/or convertible bonds, which were
issued based on the authorisation under Agenda Item 8 of the Company’s Annual General Meeting on
October 23, 2013, in the amended version pursuant to the Annual General Meeting of March 6, 2015.
Based on the resolution of the Extraordinary General Meeting of March 6, 2015, the Company’s share
capital is also conditionally increased by up to EUR 1,000,000.00 divided into up to 1,000,000 new nopar value bearer shares (Conditional Capital II/2015). The conditional capital increase will be executed
only to the extent that the holders of stock options that were issued by the Company pursuant to the
authorising resolution of the Extraordinary General Meeting on March 6, 2015 in the context of the
Company’s 2015 Stock Option Programme, exercise their subscription rights for shares of the Company
and the Company does not meet the obligations of the subscription rights with the Company’s own
shares. In the 2015 fiscal year, the Executive Board was granted the maximum number of 800,000 stock
options and employees were granted the maximum number of 200,000 stock options.
Additionally, the Company’s share capital is conditionally increased by up to EUR 3,919,447.00 divided
into a maximum of 3,919,447 no-par value bearer shares (Conditional Capital III/2015). The conditional
capital increase serves to grant no-par value bearer shares to the holders or creditors of convertible
bonds and/or bonds with warrants, profit participation rights and/or profit participation bonds (or a
combination of these instruments), which were issued or will be issued (i) based on the authorisation
resolved by the Annual General Meeting of October 23, 2013 under Agenda Item 8 to grant convertible
bonds and/or bonds with warrants and/or (ii) the resolved authorisation under Agenda Item 7 to issue
convertible bonds and/or bonds with warrants or profit participation rights and/or profit participation
bonds (or a combination of these instruments) by the Company or its direct or indirect affiliated
companies and grant conversion or warrant rights to new no-par value shares of the Company or
establish a conversion obligation. The issue of new shares is carried out at the exercise or conversion
price to be determined in accordance with the respective authorisation resolved by the Annual General
Meeting. The conditional capital increase will be carried out only to the extent that the holders or
creditors of conversion or warrant rights exercise these rights or to the extent that holders meet
their conversion obligation unless a cash settlement is granted or own shares or shares created from
authorised capital are used for servicing. The shares will participate in profits from the beginning of the
previous fiscal year, provided they are created as a result of exercise before the start of the Company’s
Annual General Meeting, and otherwise from the beginning of the fiscal year in which they are created
from the exercise of subscription rights. With the Supervisory Board’s consent, the Executive Board is
authorised to determine the further details of the conditional capital’s execution.
By the end of April 2016, a total of 14,937 convertible bonds were converted into no-par value share of
DEMIRE Deutsche Mittelstand Real Estate AG.
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7.3. Authorisation to issue convertible bonds or bonds with warrants
By resolution of the Annual General Meeting of October 23, 2013, the Executive Board is authorised,
with the consent of the Supervisory Board, to issue bearer and/or registered convertible bonds and/
or bonds with warrants on one or several occasions until September 30, 2018, for a total nominal
amount of up to EUR 50,000,000.00 with or without a limitation on the duration and to offer holders
or creditors of bonds option or conversion rights for new no-par value bearer shares of the Company
with a notional interest in the share capital of up to EUR 25,000,000.00. The warrant or conversion
rights can be serviced using existing or future conditional or authorised capital, existing or own shares
or a shareholder’s shares. They can be issued by Group companies or against contribution in kind.
The shareholders are entitled to subscription rights that can be excluded in the event of fractional
amounts, an issue against cash if the option or conversion rights do not exceed 10 % of the share
capital, if the issue price of the bonds is not materially below their market value and in order to grant
holders of warrant and/or conversion rights with subscription rights in the case of a contribution in
kind. Based on the authorisation of the Annual General Meeting, with the Supervisory Board’s consent,
the Executive Board has issued convertible bonds in a total nominal amount of EUR 26,300,000.00 with
conversion rights – subject to an adjustment because of the existing dilution protection – for up to
14,300,000 no-par value bearer shares of the Company with a notional interest in the Company’s share
capital of EUR 14,300,000.00. The authorisation to issue convertible bonds and/or bonds with warrants
beyond the remaining, not yet utilised nominal amount of up to EUR 23,700,000.00 was cancelled with
a resolution of the Annual General Meeting of August 28, 2015 and a new authorisation was resolved
permitting the issue of bearer and/or registered convertible bonds and/or bonds with warrants, profit
participation rights and/or profit participation bonds (or a combination of these instruments).
By resolution of the Annual General Meeting of August 28,2015, with the Supervisory Board’s consent,
the Executive Board was authorised to issue bearer and/or registered convertible bonds and/or bonds
with warrants, profit participation rights and/or profit participation bonds (or a combination of these
instruments – together referred to as „bonds“) on one or several occasions until August 27, 2020, for a
total nominal amount of up to EUR 125,000,000.00 with or without a limitation on the duration and to
offer holders or creditors of bonds conversion or warrant rights for no-par value bearer shares of the
Company with a notional interest in the share capital of up to a total of EUR 25,000,000.00 according
to the bond’s terms and conditions.
7.4. Authority to repurchase own shares
Based on the resolution of the Annual General Meeting of October 15, 2014, the Company is authorised
to acquire up to 10 % of the share capital existing on the date of the resolution until October 14, 2019.
The number of shares acquired under this authorisation together with other treasury shares that
were already purchased by the Company or already owned, may not exceed 10 % of the Company’s
respective existing share capital. This authorisation can be exercised in whole or in partial amounts on
one or several occasions.
Purchases are made over the stock exchange, by means of a public repurchase offer or a public
solicitation directed to shareholder to submit offers to sell:
If the share purchase takes place over the stock exchange, the consideration paid per share (each
excluding ancillary purchase costs) by the Company may not exceed or fall below 10 % of the
average closing price of the Company’s shares in XETRA trading on the Frankfurt Stock Exchange (or a
comparable successor system) on the three trading days preceding the purchase. If the Company is
listed on several stock exchanges, the Company’s respective last ten closing prices on the Frankfurt
Stock Exchange are relevant.
If the purchase is conducted by way of a public offer to all of the Company’s shareholders or by a public
solicitation to shareholders to submit offers to sell, the purchase or sales prices offered or the range
of purchase and selling prices per share, excluding ancillary acquisition costs, may not exceed or fall
below 10 % of the average closing price of the Company’s shares in XETRA trading on the Frankfurt Stock
Exchange (or a comparable successor system) on the ten trading days preceding the publication of the
offer or the solicitation to submit sales offers. If the Company is listed on several stock exchanges,
the Company’s respective last ten closing prices on the Frankfurt Stock Exchange prior to the offer’s
publication are relevant.
If, after the publication of a purchase offer or the solicitation to submit offers to sell, there is a
significant difference in the share’s trading price compared to the purchase or selling prices offered or
the range of the purchase or sales prices offered, the offer or solicitation to submit offers for sale may
be adjusted.¬ In this case, the relevant amount is based on the corresponding share price prior to the
publication of the adjustment; the 10 % threshold for exceeding or falling below the market price is
applied to this amount.
The volume of the offer may be limited. If the total subscription to the offer exceeds this volume,
acceptance takes place on a pro rata basis. Preferential acceptance may be given to smaller numbers
up to 100 tendered shares per shareholder.
The Executive Board is authorised to utilise the Company’s repurchased shares to sell them on the
stock exchange, redeem the shares while reducing share capital, transfer these shares to third parties
as consideration for business combinations or the acquisitions of companies or interests in companies,
offer the shares for sale to employees, use the shares to service warrant or conversion rights or to
dispose of the shares other than over the stock exchange, provided the selling price is not substantially
lower than the stock market price.
This authorisation has not yet been utilised.
8. Material agreements of the Company that are conditional upon a change of control following
a takeover bid and the resulting effects
Some debt financing contracts provide for an extraordinary termination right of creditors in the event
of a change of control at affected Group companies.
81
82
9. Company compensation agreements with the Executive Board and employees in the event of
a takeover bid
In the event a majority of the Company voting rights are purchased by a third party, Executive Board
members (Hon.-Prof. Andreas Steyer, Mr. Markus Drews and Mr. Frank Schaich (Executive Board
member since February 1, 2016)) have the extraordinary right to terminate their contracts. If this
extraordinary termination right is exercised or the contract is terminated by mutual agreement within a
period of six months after the change of control, they will receive the existing contractual entitlements
for the remaining term of office in the form of a one-time compensation payment based on the
compensation paid in the last full calendar year before resignation, but not exceeding the amount of
two years’ compensation. Cash compensation will be increased by the value of the Executive Board
member’s rightful share options. If no other valuation date was agreed between the parties, the value
of stock options at the time of the change of control applies.
VIII. Corporate Governance Report / Statement on Corporate Governance
On April 29, 2016, the Company’s Executive Board submitted its Statement on Corporate Governance
pursuant to Section 289a HGB and also made this document generally and permanently accessible on
its website www.demire.ag in the Company section under the heading Corporate Governance.
IX. Management Report for DEMIRE Deutsche Mittelstand Real Estate AG
In addition to reporting on the DEMIRE Group’s situation, the following presents the Company’s
development in the past fiscal year. The fundamental statements in the Group’s management report
on the market, strategy, management and the opportunities and risks of the business and the report
on subsequent events, apply equally to the Company.
DEMIRE Deutsche Mittelstand Real Estate AG is the operational management unit of the DEMIRE
Group. In the 2015 fiscal year it generated revenues from management services for or from the project
companies. The number of employees, excluding Executive Board members, increased in the reporting
year to an average of 10 (previous year: 5).
The Company’s financial statements as at December 31, 2015 were prepared in accordance with
the German Commercial Code (HGB) and the German Stock Corporation Act (AktG). Supplementary
provisions from the Articles of Association did not arise.
Results of operations, financial position, liquidity position and net assets
Results of operations
In the 2015 fiscal year, DEMIRE Deutsche Mittelstand Real Estate AG incurred a net loss of EUR 26.3 million.
This result was influenced by a number of special factors, particularly additional consulting expenses
related to the capital increases against contribution in cash and in kind, the takeover offer made to the
shareholders of Fair Value REIT-AG and the related non-deductible input taxes. Higher expenses were
also incurred as a result of a broker’s fee for the Signal Credit Opportunities (Lux) Investco II S.à.r.l.
(Signal Capital) loan used to finance a portion of the purchase price for the interest in Germavest Real
Estate S.à.r.l.
» Acquisition-related information | Corporate Governance Report / Statement on Corporate Governance |
Management Report for DEMIRE Deutsche Mittelstand Real Estate AG
Acquisition-related non-recurring and extraordinary expenses
eur Million
Consulting fees incl. non-deductible input taxes
3.8
Extraordinary costs for Signal Capital loan
4.9
Total
8.7
eurk
01/01/2015–
31/12/2015
01/04/2014–
31/12/2014
Change
Revenue
3,213
7,396
-4,183
Other operating income
2,461
2,179
282
-1,617
-369
-1,248
-22,058
-6,456
-15,602
6,348
1,309
5,039
Write-downs of financial assets
-3,957
-2,944
-1,013
Interest result
-6,298
-1,648
-4,650
Staff costs
Income from loans
Expenses from transfer of loss
-4,690
-388
-4,302
Result from ordinary activities
-26,598
-921
-25,677
Net loss
-26,276
-1,131
-25,145
The Company’s revenues resulted primarily from management fees in connection with transactionrelated and ongoing advisory services for Group companies, which in the case of new acquisitions
generally amount to 2 % of the interests’ acquisition costs and 1 % of the granted loan amounts. These
amounted to EUR 3.2 million in the reporting period and were less than half of the previous year’s level
of EUR 7.4 million (abbreviated 2014 fiscal year) because the majority of acquisitions were financed
with capital increases against contribution in kind and, therefore, the services charged to subsidiaries
declined accordingly.
Other operating income amounted to EUR 2.5 million, which was slightly higher compared to the
abbreviated 2014 fiscal year (EUR 2.2 million), and consisted mainly of services charged to affiliated
companies. Staff costs had a growth-related rise to EUR 1.6 million (abbreviated 2014 fiscal year:
EUR 0.4 million).
The rise in staff costs is a result of the increase in the Executive Board to a total of two persons in
December 2014 and the rise in the number of employees in the course of business expansion.
Other operating expenses increased by EUR 15.6 million to EUR 22.1 million. Approximately one-fourth
of this increase resulted from consulting and service fees directly related to the capital increases
against contribution in cash and in kind and the takeover offer made to the shareholders of Fair Value
REIT-AG. Approximately one-third of the added expenses related to ancillary financing costs related
to the second tranche of the 2014/2019 corporate bond and the assumption of the loan from Signal
Capital. Travel and entertainment expenses, as well as costs for investor relations, one Ordinary Annual
General Meeting and two Extraordinary General Meetings, increased sharply to keep up with the
Company’s growth.
83
84
Income from loans of financial assets amounting to EUR 6.3 million resulted from interest income for
shareholder loans to affiliated companies granted to purchase properties and interests in real estate
companies (abbreviated 2014 fiscal year: EUR 1.3 million). The interest result in the 2015 fiscal year
amounted to EUR -6.3 million (abbreviated 2014 fiscal year: EUR -1.6 million). The debt assumed by
DEMIRE AG was provided to the subsidiaries with a mark-up in the interest rate, resulting in a slightly
positive net balance of income from loans and interest result in 2015 (abbreviated 2014 fiscal year:
EUR -0.3 million).
Impairments on financial assets in the amount of EUR 4.0 million (abbreviated 2014 fiscal year:
EUR 2.9 million) were required. Half of these impairments were related to investments held in the
legacy portfolio and the other half to acquisitions made in the 2015 fiscal year.
Based on the control and profit transfer agreement concluded between DEMIRE AG and DEMIRE
Commercial Real Estate in 2014 GmbH, DEMIRE AG assumed a loss in the 2015 fiscal year of
EUR 4.7 million (abbreviated 2014 fiscal year: EUR 0.4 million). The higher loss reported by DEMIRE
Commercial Real Estate GmbH resulted from the first full year of interest on financial debt associated
with the acquisition of real estate in September and December 2014.
Due to the higher acquisition-related charges, the result from ordinary activities amounted to a loss of
EUR 26.6 million, compared to a loss of EUR 0.9 million in the abbreviated 2014 fiscal year.
Net of tax refunds of around EUR 0.3 million (abbreviated 2014 fiscal year: EUR 0.2 million), a net loss
of EUR 26.3 million was incurred in the reporting year compared to a net loss of EUR 1.1 million in the
abbreviated 2014 fiscal year.
Financial position
The Company’s financial management is executed in accordance with the guidelines adopted by the
Executive Board. The primary objective is to ensure liquidity and maintain financial independence. All
financial obligations and credit clauses (financial covenants) have been upheld during the financial year
and as at the balance sheet date. Financial covenants require the compliance with financial ratios, such
as the equity ratio, the interest cover ratio (interest service cover ratio (ISRC)) and the coverage of the
debt service (debt service cover ratio (DSCR)).
Routine reporting to the Supervisory Board on the financial situation is an integral part of DEMIRE AG’s
risk management system.
Liquidity position
Cash flow from operating activities amounted to an outflow of EUR 5.1 million compared to a cash
inflow of EUR 2.1 million in the abbreviated 2014 fiscal year. Higher cash outflows resulted from an
increase in consulting costs (EUR 7.9 million) related to capital increases against contribution in cash
and in kind, the takeover offer made to the shareholders of Fair Value REIT-AG and a growth-related
rise in staff costs.
» Management Report for DEMIRE Deutsche Mittelstand Real Estate AG
The cash outflow from investing activities significantly increased to a level of EUR 88.2 million
(abbreviated 2014 fiscal year: outflow of EUR 54.0 million) as a result of loans granted to affiliated
companies for the purchase of commercial real estate.
In fiscal year 2015, the Company had cash inflows from financing activities of EUR 93.7 million
(abbreviated 2014 fiscal year: EUR 50.0 million) from an increase in the 2014/2019 corporate bond, the
issue of new bonds in the amount of EUR 50.0 million and a cash capital increase of EUR 11.2 million.
Cash and cash equivalents as at the balance sheet date amounted to EUR 1.3 million and were somewhat
higher than the level on December 31, 2014 (EUR 1.2 million).
Net assets
eurk
31/12/2015
31/12/2014
Change
absolut
%
Assets
Fixed assets
Current assets/accruals and deferred income
Total assets
294,541
67,291
227,250
338%
45,924
14,887
31,036
208%
340,465
82,179
258,287
314%
111,507
9,959
101,548
1,020%
Equity
Provisions
7,391
1,656
5,735
346%
Liabilities
221,567
70,564
151,002
214%
Total equity and liabilities
340,465
82,179
258,287
314%
The Company’s total assets as at December 31, 2015 amounted to EUR 340.5 million. This represents an
increase of EUR 258.3 million, or approximately 314 %, over the previous year’s total of EUR 82.2 million.
Fixed assets grew significantly in the fiscal year to EUR 294.5 million (previous year: EUR 67.3 million)
due to the expansion of the Group’s commercial real estate portfolio to include the interests in the
companies acquired and the takeover of 77.7 % of the voting rights and interests in Fair Value REIT-AG.
The interests in affiliated companies in the amount of EUR 149.3 million comprise the main acquisitions
made in the 2015 fiscal year with the following acquisition costs (including ancillary acquisition costs):
Glockenhofcenter GmbH with EUR 3.2 million, Hanse-Center GmbH with EUR 11.2 million, Sihlegg
Investments Holding GmbH with EUR 4.0 million, Logistikpark Leipzig GmbH with EUR 33.6 million and
Fair Value REIT-AG with EUR 82.9 million.
Current assets increased by EUR 31.0 million from the level reported on December 31, 2014 of
EUR 14.9 million to EUR 45.9 million in the reporting year. The largest item was receivables and other
assets, which amounted to EUR 42.5 million following EUR 12.8 million on December 31, 2014. A large
portion of this item consisted of receivables against affiliated companies from the assumption of
DEMIRE’s payments for property companies and interest receivables on loans for property financing in
the amount of EUR 12.8 million (December 31, 2014: EUR 10.4 million). In addition, EUR 9.7 million were
related to an escrow account in which a partial payment was deposited for the January 2016 acquisition
of interests in Kürfürster Galerie GmbH in Kassel. As at the balance sheet date, the Company had no
right to dispose of these funds. This balance sheet item also includes loan receivables from minority
85
86
shareholders of property holding companies in the amount of EUR 4.5 million. As at the reporting
date, there was a receivable against the seller of the interests in Germavest Real Estate S.à.r.l. from the
retransfer of 2014/2019 corporate bonds in the amount of EUR 14.4 million.
Prepaid expenses grew by EUR 1.2 million to EUR 2.1 million (December 31, 2014: EUR 0.9 million) as a
result of the increase in the 2014/2019 corporate bond, net of the reversal of deferred expenses.
On the equity and liabilities side of the balance sheet, the Company’s equity increased from
EUR 10.0 million as at December 31, 2014 to EUR 111.5 million as at December 31, 2015. The increase
resulted from capital increases against contribution in kind totalling EUR 116.6 million, including the
acquisition of 77.7 % of the voting rights and interests of Fair Value REIT-AG, one cash capital increase
amounting to EUR 11.2 million and the net loss for the period of EUR 26.3 million.
The equity ratio increased accordingly to 32.7 % of total assets compared to 12.1 % as at December
31, 2014. The net loss increased the accumulated loss as at December 31, 2015 to EUR 133.5 million
(December 31, 2014: EUR 107.2 million). The capital reserve increased from EUR 102.8 million as at
December 31, 2014 to EUR 195.7 million as at December 31, 2015 as a result of the capital increases
against contribution in kind and in cash.
Provisions in the amount of EUR 7.4 million compared to EUR 1.7 million on December 31, 2014 mainly
resulted from costs for the preparation and audit of the annual and consolidated financial statements,
financing costs for the Signal Capital loan and other staff costs and outstanding invoices.
As at the December 31, 2015 reporting date, the Company’s liabilities increased from EUR 70.6 million
to EUR 221.6 million. This increase mainly resulted from the placement of additional corporate bonds
with a volume of EUR 50.0 million (December 31, 2014: EUR 50 million), the mandatory 2015/2018
convertible bond with a volume of EUR 15 million and the increase in liabilities to affiliated companies
of roughly EUR 53.9 million to EUR 59.8 million (December 31, 2014: EUR 5.9 million).
DEMIRE AG’s overall net assets and financial position developed positively in line with the increase
in interests in affiliated companies and the expansion of the DEMIRE Group’s real estate portfolio.
The associated costs put significant pressure on profitability; these costs should be regarded as an
investment in the Company’s future.
Comparison of prior year’s forecasts with actual business development
The 2015 annual financial statements of DEMIRE Deutsche Mittelstand Real Estate AG reflect the strong
growth in the DEMIRE Group and the equity and debt measures taken in this context. Because the
majority of acquisitions were financed using equity, revenues from management services declined
significantly and the revenues projected for the 2015 fiscal year were not achieved. The capital
increases against contribution in kind for the acquisition of Glockenhofcenter Objektgesellschaft mbH,
Hanse-Center Objektgesellschaft mbH, Sihlegg Investment Holding GmbH, Logistikpark Leipzig GmbH
and the takeover of the interests in Fair Value REIT-AG as part of a voluntary public takeover offer made
it necessary to prepare three securities prospectuses that led to a high amount of legal and consulting
costs. The financing conditions with Signal Capital to ensure the timely fulfilment of the purchase price
obligations for the Germavest transaction also pressured profits. Due to these measures, which were
not foreseeable at the time the forecasts were made, the Company exhausted a substantial amount of
liquidity and the originally expected positive EBIT for the 2015 financial year was not achieved.
» Management Report for DEMIRE Deutsche Mittelstand Real Estate AG
Report on outlook
The Company’s revenue is projected to rise substantially in the current fiscal year against the background
of strong growth. Higher revenue is also expected to result from additional services to the intermediary
holding and property companies that will be compensated at market rates. For the 2016 fiscal year,
we expect to generate revenue in the order of what was achieved in the abbreviated 2014 fiscal year.
This should lead to almost a break-even EBIT in the 2016 fiscal year.
A slightly positive interest result is expected to come from loans to direct and indirect subsidiaries at
a rate equal to the rate paid by the Company plus what is considered as a customary premium. The
planned and already partially secured refinancing of the high-interest HFS bond at the affiliate DEMIRE
Commercial Real Estate GmbH at much better conditions is expected to result in a loss reduction of
roughly half compared to 2015 to be assumed by the Company under the profit transfer agreement.
Therefore an almost break-even net profit for the period is expected in the 2016 fiscal year and in the
years thereafter, this loss should be completely eliminated.
The Company will receive dividend income of EUR 2.7 million in 2016 from its interest in Fair Value
REIT-AG.
Frankfurt/Main, May 13, 2016
Frank Schaich
(CEO)
(COO)
(CFO)
87
88
Consolidated Financial Statements
for the fiscal year from January 1, 2015 to December 31, 2015
eurk
Note
Rental income
Operating expenses to generate rental income
D.1
Revenue from the sale of real estate companies
01/01/2015–
31/12/2015
01/04/2014–
31/12/2014
43,344
3,749
-19,664
-1,459
23,680
2,290
1,792
4,783
-1,507
-4,713
285
69
Revenue from the sale of real estate
2,300
0
Expenses relating to real estate sales
-1,842
0
458
0
Profits from investments accounted for using the equity method
1,861
199
Losses from investments accounted for using the equity method
-3,830
-126
1,469
-1,087
Net assets from real estate companies sold
Profit/loss from the sale of real estate companies
Profit/loss from the sale of real estate
D.2
D.3
Unrealised fair value adjustments in equity investments
D.4
-500
-1,014
Profit/loss from fair value adjustments in investment properties
D.7
18,471
63,608
Unrealised fair value adjustments in real estate inventory
D.8
0
307
Impairment of receivables
D.9
-2,846
-693
Profits originating from a purchase below market value
D.10
33,217
0
Other operating income
D.11
2,572
429
51,414
63,651
Other operating income and other effects
General and administrative expenses
D.12
-11,332
-3,648
D.13
-5,265
-2,914
58,740
58,434
2,145
6,955
Earnings before interest and taxes
Financial income
Finance expenses
Financial result
D.14
Income taxes
D.15
-27,873
-9,893
-25,728
-2,938
33,012
55,496
-4,139
-9,789
28,873
45,707
756
2,405
28,117
43,302
Of which, attributable to:
Non-controlling interests
D.16
Parent company shareholders
Basic earnings per share
D.17
1.09
3.03
Diluted earnings per share
D.17
0.71
1.74
» Consolidated income statement | Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
eurk
Note
Share of other comprehensive income attributable to associated companies
01/01/2015–
31/12/2015
01/01/2014–
30/09/2014
28,873
45,707
E.1.4
0
-1,067
3,408
626
G.1/G.2
3,408
-441
32,281
45,266
accounted for using the equity method (from currency translation)
Currency translation differences
Other comprehensive income
Total comprehensive income
Of which, attributable to:
Parent company shareholders
639
2,605
31,642
42,661
89
90
Consolidated Balance Sheet
Assets
eurk
Note
31/12/2015
31/12/2014
Assets
Non-current assets
Intangible assets
E.1.1
6,961
0
Property, plant and equipment
E.1.2
11,285
11,330
E.1.3
915,089
333,070
Investments accounted for using the equity method
E.1.4
3,136
2,613
Other financial assets
E.1.5
11,045
14
Loans to investments accounted for using the equity method
E.1.6
553
2,857
Other loans
E.1.7
384
322
Deferred tax assets
E.5.1
144
720
948,597
350,926
Total non-current assets
Current assets
Real estate inventory
E.2.1
2,298
7,355
Trade accounts receivable and other receivables
E.2.2
14,387
9,287
Financial receivables and other financial assets
E.2.3
26,020
921
171
126
Tax refund claims
E.2.4
Total current assets
Investments accounted for using the equity method, available for
E.3
28,467
4,397
71,343
22,086
13,005
0
1,032,945
373,012
sale
Total assets
» Consolidated Balance Sheet
liabilities
eurk
Note
31/12/2015
31/12/2014
liabilities
Equity
Subscribed capital
49,292
14,306
Reserves
181,405
37,378
Equity attributable to parent company shareholders
230,697
51,684
34,205
2,945
E.4
264,902
54,629
Deferred tax liabilities
E.5.1
25,714
10,032
Minority interests
E.5.2
61,160
0
Non-current financial debt
E.5.3
608,796
248,092
Other non-current liabilities
E.5.4
1,076
0
696,746
258,124
Total equity
Liabilities
Non-current liabilities
Total non-current liabilities
Current liabilities
Provisions
E.6.1
1,166
852
Trade payables and other liabilities
E.6.2
19,887
11,519
Tax liabilities
E.6.3
3,801
314
Current financial debt
E.6.4
46,443
47,573
Total current liabilities
Total liabilities
Total equity and liabilities
71,297
60,259
768,043
318,383
1,032,945
373,012
91
92
Consolidated statement of cash flows
eurk
Note
01/01/2015–
31/12/2015
01/04/2014–
31/12/2014
Group profit/loss before taxes
33,012
55,496
Financial expenses*
27,873
9,893
Financial income*
-2,145
-6,955
650
0
7,633
-7,543
576
208
Proceeds from the sale of real estate inventory
Change in trade accounts receivable and other receivables
Change in deferred tax assets
-23
-55
Change in financial receivables and other financial assets
Change in income tax receivables
-8,234
470
Change in intangible assets
-6,883
1
Change in provisions
-1,329
65
Change in trade payables and other liabilities
-1,958
7,558
8,860
8,821
-18,471
-63,608
-743
-69
Change in deferred tax liabilities
Valuation gains under IAS 40
Gains from the sale of real estate companies
Interest proceeds*
Income taxes *
Income tax payments*
Profit originating from a purchase below market value
Change in reserves and subscribed capital
165
293
-3,953
-9,767
-186
-22
-33,217
0
4,462
2,290
500
1,014
Fair value adjustments in real estate inventory
0
-307
Depreciation, amortisation and impairments*
2,846
693
Other non-cash items*
1,380
-2,462
10,815
-3,986
Payments for investments in property, plant and equipment
-11,258
-11,356
Payments for the purchase of investment properties and interests in fully consolidated companies, less net cash and equivalents acquired
-15,238
-248,726
Acquisition of interests in in fully consolidated companies in the context of business
combinations
-4,319
0
F
1,650
0
Proceeds from the disposal of investments accounted for using the equity method and
other investments
Proceeds from the sale of property, plant and equipment
0
3,700
Proceeds from the repayment of loans from investments accounted for using the
equity method and other investments
0
101
Proceeds from the sale of subsidiaries (less cash and cash equivalents sold)
0
1,075
-29,165
-255,206
11,158
0
F
Proceeds from the issue of equity
Payments for expenses associated with raising equity
-1,514
0
Proceeds from the issue of bonds
36,023
0
Proceeds from the issuance of financial debt
54,700
261,738
Interest paid on financial debt
-21,255
-1,607
Payments for the redemption of financial debt
-36,692
-497
42,420
259,634
F
Net change in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
*Prior year’s information was adjusted for changes in classification.
F
24,070
442
4,397
3,955
28,467
4,397
93
» Consolidated statement of comprehensive income | Consolidated statement of changes in equity
Consolidated statement of changes in equity
EURk
Note
Share capital
Reserves
Subscribed
capital
Capitalreserves
14.306
8.233
32.802
0
434
0
Mandatory convertible securities
0
14.223
0
Proportional transfer of earningsneutral changes in equity in investments
accounted for using the equity method
0
0
0
01/01/2015
G
Stock option plan
Retained
Reserves
earnings for treasury
incl.
shares
Group
profit/loss
Currency
translation
Equity
attributable
to parent
company
shareholders
Anteile
der nicht
beherr
schenden
Anteilseigner
„Interests
of noncontrolling
share
holders
-310
-3.348
51.684
2.945
7.702
0
0
434
0
434
0
0
14.223
0
14.223
0
0
0
0
0
0
0
0
0
3.291
3.291
117
3.408
G
0
0
0
0
3.291
3.291
117
3.408
0
0
28.117
0
0
28.117
756
28.873
G
0
0
28.117
0
3.291
31.408
873
32.281
227
-12
0
0
0
215
0
215
32.285
92.853
0
0
0
125.138
0
125.138
2.474
8.684
0
0
0
11.158
0
11.158
Costs of raising equity under capital
increases
0
-3.295
0
0
0
-3.295
0
-3.295
Change in the scope of consolidation
0
0
-268
0
0
-268
30.387
30.119
230.697
34.205
264.902
Total other comprehensive income
Capital increase (related to the conversion of convertible bonds)
Capital increases against contribution
in kind
Cash capital increases
31/12/2015
G
49.292
121.120
60.651
-310
-57
01/04/2014
G
13.895
7.455
-10.500
-310
-2.706
7.835
-133
7.702
Proportional transfer of earningsneutral changes in equity in investments
0
0
0
0
-1.067
-1.067
0
-1.067
0
0
0
0
425
425
201
626
Total other comprehensive income
G
G
Capital increase (related to the conversion of convertible bonds)
0
0
0
0
-642
-642
201
-441
0
0
43.302
0
0
43.302
2.405
45.707
0
0
43.302
0
-642
42.660
2.606
45.266
411
108
0
0
0
519
0
519
Change in the scope of consolidation
0
0
0
0
0
0
472
472
Changes related to convertible bond
recognised directly in equity
0
493
0
0
0
493
0
493
Change in deferred taxes recognised
directly in equity (related to the convertible bonds)
0
177
0
0
0
177
0
177
14.306
8.233
32.802
-310
-3.348
51.684
2.945
54.629
31/12/2014
G
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Notes to the consolidated financial statements for fiscal year
January 1 to December 31, 2015
(Previous year: April 1, 2014 to December 31, 2014)
A. General information
1. Corporate information
DEMIRE Deutsche Mittelstand Real Estate AG („DEMIRE“, „DEMIRE AG“ or the „Company“) is recorded
in the commercial register in Frankfurt/Main, Germany, the location of the Company’s head-quarters,
under the number HRB 89041.
The Company’s principle registered offices are located at Lyoner Strasse 32 in Frankfurt/Main. Until
the year 2014, the Company’s fiscal year-end was March 31. The change in the Company’s fiscal yearend was resolved by the Annual General Meeting on October 15, 2014 and recorded in the commercial register on November 18, 2014. Effective as at January 1, 2015, the Company’s fiscal year was
aligned to the calendar year. This change resulted in a uniform fiscal year-end across the entities
in-cluded in the scope of consolidation and an abbreviated fiscal year running from April 1, 2014
to December 31, 2014. Because of this change in the fiscal year-end and the abbreviated fiscal year
(April 1 through December 31, 2014) that resulted, the comparability of the data on the reporting
date to the previous year’s data is limited.
The Company’s shares are listed in the General Standard segment of the Frankfurt Stock Exchange.
To date, DEMIRE itself has not carried out any investments in real estate or real estate projects. Investments are generally processed through project companies. Interests in these project companies
are either directly or indirectly held (through intermediate holding companies) by DEMIRE.
The Company’s strategic realignment in fiscal year 2013/14, which created a clear focus on commercial real estate in Germany, meant a shift in DEMIRE’s business model from a „develop & sell“ strategy to a „buy & hold“ strategy with active portfolio management.
As at the reporting date, DEMIRE’s investment portfolio contained investments in the following four
countries: Germany, Romania, Bulgaria and Georgia. Because of DEMIRE’s new focus on Germany,
the Company is rapidly withdrawing from the remaining regions.
The consolidated financial statements as at the reporting date include the DEMIRE subgroup and the
Fair Value REIT subgroup. The DEMIRE subgroup contains the consolidated financial statements of
DEMIRE AG and its subsidiaries – except for the Fair Value REIT subgroup – which in turn comprises
the consolidated financial statements of Fair Value REIT-AG and its subsidiaries. Fair Value REIT-AG is
the parent company of the Fair Value REIT subgroup.
2. Application of International Financial Reporting Standards (IFRS)
DEMIRE prepares its consolidated financial statements according to International Financial Reporting
Standards (IFRS), as applicable in the EU, pursuant to Article 4 of the EC Directive number 1606/2002
of the European Parliament and Council from July 19, 2002 regarding the application of International
Financial Reporting Standards. The consolidated financial statements of the DEMIRE Group, which
are prepared by DEMIRE AG as the legal parent company, are prepared according to uniform accounting principles. The statements’ preparation takes into account all IFRS standards that require
mandatory application as at the reporting period ending on December 31, 2015, including currently
valid International Accounting Standards (IAS), and the interpretations of the International Financial
Reporting Interpretations Committee (IFRIC), including the currently valid interpretations of the
» General information
former Standing Interpretations Committee (SIC), as applicable in the EU. The consolidated financial
state-ments prepared by DEMIRE AG fully comply with the IFRS guidelines in their current applicable
ver-sion to the degree they were adopted by the European Union according to Article 6 para. 2 IAS VO
1606/2002 by comitology procedure in accordance with European Union regulations. They also give
consideration to the supplementary German commercial law provisions, applicable in accordance
with Section 315a para. 1 of the German Commercial Code (HGB).
3. First-time application of new accounting standards in fiscal year 2015
The accounting and valuation policies applied excluding those described in the following section
generally correspond with those applied in the prior year.
The International Accounting Standards Board (IASB) and the International Financial Reporting
Stand-ards Committee (IFRIC) approved the following standards and interpretations (which have
already passed the EU recognition procedure) that are mandatory for the first-time in the 2015 fiscal
year. Thus, the following standards and interpretations were applied for the first time in the 2015
fiscal year:
Annual Improvements to
As part of the annual „Improvements Project“, clarifications to the
IFRS 2011 – 2013 Cycle
following standards have been issued:
IFRS 1
Applicable IFRSs,
IFRS 3
Scope of exceptions for joint arrangements,
IFRS 13 Application of portfolio exceptions and the waiving
of discounting of current receivables and liabilities in
measuring fair value, if the effect is immaterial,
IAS 40
Interrelationship between IFRS 3 and IAS 40 when
classifying investment property as owner-occupied.
The above amendments were endorsed by the EU on
December 18, 2014 and are mandatory for the first time for fiscal
years beginning after January 1, 2015.
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IFRIC 21 “Levies“
IFRIC 21 governs when levies charged by public authorities should
be recognised as a liability. The interpretation applies to levies that
are accounted for as provisions, contingent liabilities or contingent
assets pursuant to IAS 37 and to levies for which the timing and
amount are known. The following provisions apply:
Folgende Leitlinien sind zu nennen:
■The liability is to be recognised on a pro rata temporis basis if
the triggering event occurs over a period of time,
■
If the liability is triggered upon reaching a minimum threshold,
the liability is only recognised once this threshold is reached.
The standards and interpretations that were applied for the first time in fiscal year 2015 had no
material effect on the Group’s net assets, financial position and results of operations.
4. Changes in reporting of previous year information
For better comparability with the reporting period, the following changes have been made with
respect to the previous year’s information:
In the consolidated statement of cash flows for the abbreviated 2014 fiscal year, financial expenses
(EURk -9,893) and financial income (EURk 6,955) were added as reconciliation items within cash flow
from operating activities and the actual interest proceeds (EURk 293) were reported. In addition, all
non-cash tax postings were eliminated, which resulted in a change in deferred tax assets, deferred
tax liabilities and income tax receivables of EURk 0 each. Income taxes paid (EURk -22) were reported
separately and other non-cash items (EURk -3,255) were adjusted for changes in the structure of the
consolidated statement of cash flows.
The asset management activities provided for third parties as part of the business activities of the
predecessor company until September 2013, are no longer reported separately. Trailing income
(EURk 6) and expenses (EURk 395) as well as segment assets (EURk 1,185) and segment liabilities
(EURk 1,056) from the Austrian subsidiary are, therefore, included in the retitled segment “Corporate
Functions/Others”.
In the previous year’s segment report, the figures for the activities of the Asset Management segment
were allocated to the Central Functions segment.
5. Future applicable accounting standards and amendments to standards
The following standards, amendment to standards and interpretations were already published by
the IASB at the time of preparing these consolidated financial statements but did not yet require
mandatory application in the reporting period. The Company did not exercise the option for voluntary
early application.
Endorsed by
the EU
Not yet
endorsed by
the EU
Potentially
relevant for the
Company
Mandatory firsttime application
for fiscal years
beginning on or
after
Amendments to standards:
Amendment to IAS 1
x
Amendments to IAS 16 and IAS 38
x
x
01/01/2016
01/01/2016
Amendments to IAS 16 and IAS 41
x
01/01/2016
Amendment to IAS 19
x
01/02/2015
Amendment to IAS 27
x
01/01/2016
Amendments to IFRS 10, IFRS 12 and IAS 28
x
01/01/2016
Amendment to IFRS 11
x
x
01/01/2016
Annual improvements to IFRS (2010 – 2012)
x
01/01/2015
Annual improvements to IFRS (2012 – 2014)
x
01/01/2016
IAS 7 „Statement of Cash Flows“
IAS 12 “Recognition of Deferred Tax Assets for
Unrealised Losses“
x
x
x
01/01/2017
x
01/01/2017
IFRS 14 „Regulatory Deferral Accounts“
x
01/01/2016
IFRS 15 „Revenue from Contracts
with Customers“
x
x
01/01/2018
IFRS 9
x
x
01/01/2018
IFRS 16 "Leases"
x
x
01/01/2019
New standards:
IAS 1 “Disclosure Initiative”
The amendments to this standard have not yet been endorsed by the EU. The amendments concern
various reporting issues. It is clarified that disclosures in the notes are only required when their content
is significant. This also applies explicitly when a standard requires a list of minimum information. In
addition, explanations to the aggregation and disaggregation of items in the balance sheet and the
statement of comprehensive income are also included. Furthermore, clarification is given as to how
interests in other comprehensive income of companies accounted for using the equity method are
presented in the statement of comprehensive income. The amendments are effective for fiscal years
beginning on or after January 1, 2016. DEMIRE is currently assessing the effects of the standard’s
future application on the Company’s consolidated financial statements.
Annual improvements to IFRS (2010-2012)
Annual improvements to IFRS – 2010-2012 Cycle are applicable to fiscal years beginning on or after
February 1, 2015. The amendments to IFRS (2011-2013) are applicable to fiscal years beginning on or
after January 1, 2015. The amendments will have no effect on DEMIRE’s future consolidated financial
statements.
Annual improvements to IFRS (2012-2014)
Annual improvements to IFRS – 2012-2014 Cycle (Amendments to IFRS 5 – “Non-current Assets
Held for Sale and Discontinued Operations”, IFRS 7 – “Financial Instruments: Disclosures”, IAS 19
“Employee Benefits”, IAS 34 “Interim Financial Reporting”. These amendments are applicable to fiscal
years beginning on or after January 1, 2016; EU endorsement of the amendments is still pending. The
amendments will have no effect on DEMIRE’s consolidated financial statements.
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IAS 7 “Statement of Cash Flows”
The amendments to IAS 7 “Statement of Cash Flows” stipulate that entities must provide information
on changes to financial liabilities, and the corresponding proceeds and payments must be reported
in the statement of cash flows under cash flow from financing activities. The information must also
include the corresponding financial assets. The IASB recommends providing the information in
the form of a reconciliation or other way of presentation. Mandatory first-time application of IAS 7
applies to fiscal years beginning on or after January 1, 2017. Early adoption is permitted. DEMIRE is
currently assessing the effects of the standard’s future application on the Company’s consolidated
financial statements.
IAS 12 “Recognition of Deferred Tax Assets for Unrealised Losses”
The amendments relate to the recognition of deferred tax assets for unrealised losses and address
several issues relating to the recognition of deferred tax assets for unrealised losses that result from
fair value adjustments of debt instruments and are recognised within other comprehensive income.
These amendments to IAS 12 are applicable to fiscal years beginning on or after January 1, 2017.
DEMIRE is currently assessing the effects of the standard’s future application on the Company’s
consolidated financial statements.
IFRS 15 “Revenue from Contracts with Customers”
On May 28, 2014, the International Accounting Standards Board (IASB) and that Financial Accounting
Standards Board (FASB) published the joint reporting standard IFRS 15 (Revenue from Contracts
with Customers). The objective of the new standards concerning revenue recognition is to combine
the various rules previously contained in diverse standards and interpretations. At the same time,
uniform principles were established that are applicable for all sectors and all categories of sales
transactions. Under IFRS 15, the amount that shall be recognised as revenue is the amount expected
as consideration for the transfer of goods or services to customers. The point or period in time
of revenue recognition is based on when the transfer of control over the goods or services to the
customer takes place (the control approach). Control is defined as the ability to specify the use of the
goods or services and the ability to reap the economic benefits from these goods or services. Based
on a decision of the IASB in April 2015, the first-time application of IFRS 15 has been postponed to
January 1, 2018. DEMIRE is currently assessing the effects of the standard’s future application on the
Company’s consolidated financial statements.
IFRS 9 “Financial Instruments”
On July 24, 2014, the IASB published IFRS 9 “Financial Instruments”. This standard is the culmination
of the completed phases of the comprehensive project of the IASB on financial instruments and
includes provisions for recognition, measurement and derecognition of financial instruments and
hedge accounting. IFRS 9 (2014) replaces all previously published (previous) versions of IFRS 9
and merges them with new rules for recognising impairment and minor adjustments to the
classification and measurement of financial assets. The new standard will replace the regulations
for the accounting of financial instruments under IAS 39 “Financial Instruments: Recognition and
Measurement”. Mandatory first-time application of IFRS 9 is applicable for fiscal years beginning on
or after January 1, 2018. Early adoption may be permitted depending on the final adoption by the EU
endorsement process. DEMIRE is currently assessing the effects of the standard’s future application
on the Company’s consolidated financial statements.
IFRS 16 “Leases”
IFRS 16 “Leases” governs the recognition, measurement, reporting and disclosure requirements for
leases. For the lessee, IFRS 16 provides for a single leasing model, which, for the lessee, means that
all assets and liabilities from lease agreements are to be recognised on the balance sheet unless the
lease’s term is twelve months or less, or concerns low-value assets. For the lessor, the rules under
IFRS 16 are similar to the provisions of IAS 17. Leases contracts continue to be classified as either
finance or operating leases. Mandatory application of IFRS 16 is for fiscal years beginning on or
after January 1, 2019. Early application is permitted. DEMIRE is currently assessing the effects of the
standard’s future application on the Company’s consolidated financial statements.
6. Key discretionary decisions, judgments and assumptions
Discretionary decisions
The Company’s management has made the following discretionary decisions when applying
accounting methods. This applies to the following items in particular:
■
In the case of real estate, at each reporting date, DEMIRE must determine whether these
assets should be allocated to real estate inventory or investment properties. Classification
is based on the following assessment:
■
Investment properties: The primary aim with these properties is sustainable
management. The properties are held to generate rental income and/or for value
appreciation.
■
Real estate inventory: The primary aim with these properties is either a “buy & sell” or
“develop & sell” strategy. Consequently, these properties are held for sale in the course
of ordinary business activities.
■
If the company obtains control over an acquired entity or acquires assets, it must be
determined whether the transaction should be classified as a business combination
according to IFRS 3, or an acquisition of a group of assets or net assets (aggregated assets).
If a business operation defined as an integrated group of activities is acquired in addition
to assets and liabilities, this constitutes a business combination that must be accounted for
according to IFRS 3. An integrated group of activities is defined, for example, as business
processes in the areas of property management, credit management and accounting.
Additionally, the fact that staff is employed at the acquired real estate company is another
indication that a business operation has been acquired.
■
For assets to be sold, it must be determined whether they can be sold in their current
condition and if a sale is highly probable. In this case, the assets are to be reported and
measured as assets held for sale in accordance with IFRS 5.
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100
■
Fair Value REIT-AG, Munich, was fully consolidated in the consolidated financial statements
for the first time as of December 31, 2015, in accordance with the provisions of IFRS 3 for
business combinations. In this context, DEMIRE recognised deferred taxes for temporary
differences from Fair Value REIT (referred to as “inside basis differences”) by applying the
company-specific tax rate. Since Fair Value REIT-AG is generally exempt from taxes, no taxes
are incurred at the level of Fair Value REIT as long as its status as a tax-exempt REIT (Real
Estate Investment Trust) is maintained. In addition to the “inside basis differences”, the
provisions for “tax transparent entity” were also applied so that “outside basis differences”
were also considered when recognising deferred taxes in DEMIRE’s consolidated financial
statements. Companies having the status of a Real Estate Investment Trust (REIT) are
generally obliged to distribute their profits to shareholders in order to maintain their REIT
status. In the recognition of deferred taxes, the deemed disposal of all properties directly
held by Fair Value REIT-AG and indirectly held through the trusts was assumed. Taking into
account the ownership interests within Fair Value REIT and DEMIRE’s 77.7 % interest in Fair
Value REIT-AG, deferred tax liabilities were calculated for the differences of fair values and
carrying amounts under tax law of the individual properties as of December 31, 2015.
Estimates and assumptions
The preparation of consolidated financial statements complying with IFRS requires the management
to make estimates and assumptions. Various items require forward-looking assumptions to be
made. These assumptions may have a material impact on the carrying amounts of the assets and the
liabilities as at the balance sheet date as well as the level of income and expenses in the fiscal year.
The assessment of the Company’s future business development is based on a realistic assessment
of the future economic environment in the sector and region in which DEMIRE and its subsidiaries
operate at the time of preparing the consolidated financial statements. The most important forwardlooking assumptions and other material sources of estimation uncertainty as of the reporting date
that could result in a considerable risk of significant adjustments to the carrying amounts of assets
and liabilities in the next fiscal year are discussed below.
Goodwill
Goodwill is tested for impairment at least once a year as part of a scheduled annual impairment
test. The determination of the recoverable amount requires making assumptions and estimates with
respect to the future development of income and the sustainable growth rate of the cash-generating
unit of group of cash-generating units to which the goodwill was allocated.
Investment properties include the Company’s real estate, which is held to generate rental income
and capital appreciation and not for the Company’s own use or for its sale in the ordinary course
of business. The investment properties are initially recognised at acquisition cost, which includes
incidental acquisition costs. In subsequent periods, they are measured at fair value in accordance
with the option provided for in IAS 40 in conjunction with IFRS 13. Any changes in fair value are
recognised in profit or loss.
The Group has commissioned independent experts to determine the fair values of its investment
properties.
Key valuation parameters used to measure investment properties include expected cash flows,
assumed vacancy rates and their development over the planning period, discounting and capitalisation
rates. If market values cannot be derived from the sales of comparable properties, the valuation of
the DEMIRE subgroup properties are measured using the discounted earnings model, and the value
of the Fair Value REIT subgroup properties are measured using the discounted cash flow method.
Trade accounts receivable
Assessing the recoverability of receivables from current leases is also derived from estimates.
Estimates for the recoverability of outstanding receivables are based on an analysis of the term
structure of outstanding receivables and the corresponding probability of default based on past
experience.
Estimates of the net realisable value of the real estate inventory are based on the most reliable
substantial indicators at the time the estimates are made and take into consideration the
amount expected to be received for the real estate inventory. These estimates take into account
any changes in price and cost that are directly related to transactions after the reporting period
insofar as these transactions shed light on circumstances that already existed at the end of the
reporting period. The determination of the net realisable value is based either on the comparative
value method in the context of valuation reports by prominent independent external experts in
accordance with international valuation standards or internal estimates of market values made by
the Company’s legal representatives. The carrying amount of the real estate inventory concerned
amounted to EURk 2,298 (December 31, 2014: EURk 7,355). Of this amount, a total of EURk 1,558
(December 31, 2014: EURk 1,541) of real estate inventory was valued using internal estimates of
the market value. There were no reversals of impairment on amortised costs during the reporting
year. The remaining amount of EURk 743 (December 31, 2014: EURk 2,857) is based on comparative
valuation reports. Information on the results of the valuations can be found in Note D.6.
Deferred tax assets on tax loss carryforwards
The recognition of deferred tax assets on tax loss carryforwards depends on the extent of the
Company’s ability to realise future tax benefits. Deferred tax assets on tax loss carryforwards were
recognised in the amount of EURk 3,937 (December 31, 2014: EURk 1,698). Determining the amount
of deferred tax assets is mainly based on the assessment of the company’s management, the likely
timing and level of future taxable income and future tax planning opportunities. Based on these
estimates, the amount of deferred tax assets recognised for tax loss carryforwards is reviewed
annually to reflect current conditions. Further explanation can be found in Notes D.13 and E.5.1.
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102
Other provisions
Provisions are based on assumptions concerning the probability of occurrence and the amount of
utilisation of the uncertain obligation, taking into account the information available at the time of
preparing the financial statements.
Financial debt
In measuring financial debt it is important to consider estimated future cash flows and any potential
changes to the conditions.
Consolidation of entities in which the Group does not hold the majority of voting rights
Fair Value REIT-AG’s majority of the voting rights represented at the shareholders’ meetings of its
subsidiaries, which is the decisive criteria for exerting control over the subsidiaries, is crucial for
determining the Group’s scope of consolidation. The voting rights in the entities BBV ImmobilienFonds Erlangen GbR, Munich (“BBV 02”), BBV Immobilien-Fonds Nr. 10 GmbH & Co. KG, Munich
(“BBV 10”) and IC Fonds & Co. Gewerbeobjekte Deutschland 15. KG, Munich (“IC 15”) are not the
sole deciding factor in the question of who controls the entities. Although the share of voting rights
is below 50 %, Fair Value REIT-AG represents the largest single shareholder in these entities. A test
of the control of the investment companies as a condition for their full consolidation leads to the
conclusion that, also in the past fiscal year, Fair Value REIT-AG has the ability to exercise substantial
rights, such as the right to approve the financial statement, the amount of the dividend and the
selection of property and fund management companies, at all fully consolidated fund companies by
means of a simple majority at the shareholders’ meetings. Empirically it can be evidenced that at all
shareholder meetings Fair Value REIT-AG regularly cast well over 50 % of the votes. This is in contrast
to transactions in the context of property disposals which require a qualified 66 % or 75 % majority
of the voting rights, although these transactions do not represent a material operational activity. In
addition, Fair Value REIT-AG receives annual dividends from its investees that are dependent on the
respective current results.
Obligations from operating leases – The Group as lessor
The Group has entered into commercial property lease agreements for its real estate inventory and
its investment properties. These agreements stipulate that the Group should retain all the significant
risks and opportunities connected with the ownership of properties rented. Consequently, the Group
accounts for these properties as “operating leases”. Material assumptions concern the classification
of leases as operating leases based on an analysis of the contracts’ terms and conditions and an
evaluation of the recoverability of outstanding receivables from lease agreements concerning
commercial rentals.
The estimates and assumptions are based on the circumstances and assessments on the balance
sheet date. Further explanations on the estimates and assumptions made can be found in the notes
to the consolidated statement of income, the notes to the consolidated balance sheet and other
disclosures.
» General information | Scope and principles of consolidation
DEMIRE’s Executive Board assumes that the estimates and assumptions made are appropriate;
however, unforeseen changes in these assumptions could affect the Group’s net assets, financial
position and results of operations.
B. Scope and principles of consolidation
1. Scope of consolidation
In addition to the inclusion of DEMIRE AG, these consolidated financial statements generally include
all German and foreign subsidiaries from the date of their acquisition. The main changes in the
scope of consolidation in the reporting period concern the acquisition of Fair Value REIT-AG and
its subsidiaries and Germavest Real Estate S.à.r.l (see subsections “Business combination with Fair
Value REIT-AG” and “Business combination with Germavest Real Estate S.à.r.l.”) and the purchase of
other real estate companies (see section “Acquisition of real estate companies”), through which the
different properties were acquired.
In addition, the property management company DEMIRE Immobilien Management GmbH, Berlin,
acquired in the reporting year was included in the consolidated financial statements for the first
time. PANACEA Property GmbH and PRAEDIA GmbH, which were also acquired during the reporting
year, were not included in the consolidated financial statements for reasons of materiality based on
their relative contribution within the group of consolidated companies and minor importance.
The composition of the scope of consolidation is shown in Appendix 1. The scope of consolidation
comprised 78 fully consolidated entities (previous year: 54), including the ultimate parent company,
and has changed during the fiscal year as follows.
Number of fully consolidated subsidiaries
2015
2014
As of the beginning of the fiscal year
54
30
Additions
20
27
Additions through business combinations
17
0
Disposals through sale/liquidation
7
3
Mergers
6
0
78
54
As at the balance sheet date
Definition of types of entities:
A subsidiary is an entity that is controlled by another entity (referred to as parent company).
An associated company is an entity upon which the investor has a significant influence but does not
exert control or joint control.
A joint venture is a joint arrangement in which the parties that exert joint control have rights to the
net assets of the arrangement.
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104
Changes to the scope of consolidation
Additions in the reporting year
Business combination with Fair Value REIT-AG
Fair Value REIT-AG, Munich, was fully consolidated for the first time in the consolidated financial
statements as at December 31, 2015 in accordance with the provisions of IFRS 3 for business
combinations because the business operations and related business processes had been acquired.
On October 14, 2015, the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG made a
voluntary public takeover offer to the shareholders of Fair Value REIT-AG in which they could exchange
their shares in newly created shares of DEMIRE. The aim of the acquisition was to create the leading
commercial real estate specialist focused on German secondary locations with a common real estate
portfolio valued at roughly EUR 1 billion.
The capital increase against contribution in kind took place at a ratio of two DEMIRE shares for one
Fair Value REIT-AG share. The exchange took legal effect on December 21, 2015 with its entry of the
capital increase in the commercial register in Frankfurt/Main. DEMIRE’s takeover offer was accepted by
77.70 % of the Fair Value REIT-AG shareholders. A total of 10,963,878 Fair Value REIT-AG shares of the
full total of 14,110,323 shares were tendered for exchange during the initial acceptance period and the
additional acceptance period that extended until December 3, 2015.
On December 16, 2015, DEMIRE’s Executive Board resolved to increase the share capital by an amount
of EUR 21,927,756.00 to EUR 49,292,285.00 against contribution in kind by issuing 21,927,756 new nopar value bearer shares (no-par value shares) with a notional interest in the share capital of EUR 1.00
each. The contribution in kind consisted of 10,963,878 shares of Fair Value REIT-AG with a notional
interest in the share capital of EUR 2.00 per share. On December 21, 2015, the increase in share capital
was entered into the commercial register.
Fair Value REIT-AG is a Munich-based, publicly traded real estate company with a focus on commercial
properties in Germany. It is registered as a German stock corporation in the commercial register of
the District Court of Munich under HRB 168882. The Company’s fiscal year is identical to the calendar
year. The target company fulfils the requirements of the REIT Act (Real Estate Investment Trust) and
is thus exempt from corporation and trade taxes. On the acquisition date, the portfolio consisted
of 40 properties in 8 of 16 federal states with aggregate rentable space of approx. 275,000 m² and
annualised contractual rent totalling EURk 25,188.
The first-time consolidation of Fair Value REIT-AG took place on December 31, 2015 on a subgroup
basis and based on the share of non-controlling shareholders at that time.
The consolidation of Fair Value REIT as a subgroup entailed acquisition costs of roughly EURk 93,263 for
77.70 % of the shares. These costs resulted from the fair value of EUR 4.2532 per DEMIRE share on the
closing date of the share exchange of December 21, 2015 issued in exchange for shares in Fair Value
REIT-AG (21,927,756 DEMIRE shares).
The acquisition costs were distributed among the acquired assets and liabilities valued at their
estimated market values as part of the final purchase price allocation conducted by an external expert:
» Scope and principles of consolidation
EURk
287,794
Other non-current assets
9,387
Current assets
5,674
16,028
Non-current assets, held for sale
11,750
Acquired assets
330,633
-187,738
Current liabilities
-25,497
Acquired liabilities
-213,235
Net assets (100 %)
117,398
-26,179
Deferred tax assets (see explanation)
Goodwill
Consideration transferred
-4,739
6,783
93,263
The majority of investment properties was appraised as at December 31, 2015 by external real estate
experts. DEMIRE AG adopted these values as a result of its own assessment.
In the course of determining the purchase price allocation, the following intangible assets at Fair Value
REIT were identified:
Fair Value REIT’s Internet domain was capitalised at EURk 25 and valued at its replacement cost.
Contractual claims from partner companies were capitalised as an intangible asset and measured
at EURk 150. Hidden reserves of EURk 613 were also identified with non-current financial liabilities
resulting from the fair values being below their nominal values. Deferred tax liabilities resulting from
the hidden reserves totalled EURk 227 at the level of Fair Value REIT and were determined using a
combined corporate and trade tax rate of 31.925 % (including 5.5 % solidarity surcharge on corporate
taxes).
An amount of EURk 120 of hidden losses was identified within non-current financial debt. The higher
value of the convertible bond (EURk 413) versus its market value of EURk 8,301 as at December 31, 2015
was also identified as a hidden loss, triggered by the change of control and the subsequently requested
early redemption of the bond (EURk 8,714) in February 2016. Both items resulted in deferred tax assets
of EURk 170.
In the context of the consolidation of the Fair Value REIT-AG and DEMIRE AG subgroups, net deferred
tax liabilities of EURk 4,739 on the deemed disposal of properties held by Fair Value REIT (analogous to
the “tax transparent entities”) were recognised based on the tax rate mentioned above. This resulted
in goodwill of EURk 6,783 in DEMIRE AG’s consolidated financial statements originating from the
acquisition of Fair Value REIT. Deferred tax liabilities increased goodwill by EURk 2,044 from EURk 4,739
to EURk 6,783.
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106
Contingent liabilities as defined by IAS 37, which result in a liability at the time of first-time consolidation
under IFRS 3.22, were not identified.
Transaction costs arising in the context of the share exchange amounted to EURk 3,295 and were offset
against capital reserves and thus recognised directly in equity. Expenses of EURk 978 related to the
business combination were recognised through profit or loss.
The valuation of interests of non-controlling shareholders was based on their share of the net assets of
Fair Value REIT, which at the time of its first-time consolidation amounted to EURk 26,179. In measuring
the interests of non-controlling shareholders (minority interests) use of the option under IFRS 3.19 was
made and the interests of non-controlling shareholders were measured using the corresponding share
of the identifiable net assets.
After offsetting acquisition costs (EURk 93,263), plus minority interests (EURk 26,179), against the net
assets of the acquired company (EURk 117,398), a positive difference emerged (goodwill) in the amount
of EURk 2,044. The reason for the positive difference lies, among others, in the appreciation of the
share price until December 21, 2015 of the DEMIRE shares given as consideration. In the context of its
own growth strategy, DEMIRE sees development potential from its acquisition of Fair Value REIT in the
real estate directly or indirectly held by Fair Value REIT and from the opportunity to realise synergies in
the areas of administration and property and facility management.
The gross amount of the trade accounts receivable acquired totalled EURk 3,266 upon initial
consolidation and included previous impairments of EURk 509. Thus, the fair value of trade accounts
receivable amounted to EURk 2,757. The gross amount of other receivables and assets acquired totalled
EURk 2,895 upon initial consolidation. No impairment has been recognised on these receivables. Thus,
the fair value of other receivables and assets amounted to EURk 2,895.
If Fair Value REIT had been fully consolidated as at January 1, 2015, net rental income of EURk 17,726
and profit/loss before taxes of EURk 6,585 would have been included in the consolidated statement of
comprehensive income.
No material net rental income or substantial Group profit/loss before taxes was generated during the
period of affiliation to the group (December 21, 2015 to December 31, 2015).
Business combination with Germavest Real Estate S.à.r.l.
DEMIRE AG acquired 94 % of the interests in Germavest Real Estate S.A.R.L., Luxembourg, at a
purchase price of approx. EURk 39,016 with effect from October 30, 2015. Germavest Real Estate
S.à.r.l. is incorporated under Luxembourg law and headquartered in Luxembourg. Germavest
Real Estate S.à.r.l. has a commercial real estate portfolio also called the “T6 portfolio”, containing
143,788 m² of rental space as well as 2,171 underground and free-standing parking spaces in the
cities of Ansbach, Bonn, Flensburg, Freiburg, Regensburg and Stahnsdorf. All six locations have longterm rental contracts with Deutsche Telekom AG until 2021 (until 2025 for the location in Bonn). The
net annual rent, excluding utilities and based on the properties’ current full occupancy, amounts
to roughly EUR 14.8 million and will rise periodically based on a contractually agreed fixed annual
indexation. The largest property with approximately 38,000 m² has a rental agreement with a term
of 10 years.
The following table shows the individual locations and their rentable space:
Location of property
Rentable space (in m²)
Bayreuther Straße 111/Rettistraße 56, 91522 Ansbach
12,632
Bonner Talweg 100/Reuterstraße, 53113 Bonn
38,353
Eckernförder Landstraße 65, 24941 Flensburg
23,800
Berliner Allee 1, 79114 Freiburg
22,674
Bajuwarenstraße 4, 93053 Regensburg
29,219
Güterfelder Damm 87-91, 14532 Stahnsdorf
Total space
17,110
143,788
Germavest Real Estate S.à.r.l. was fully consolidated as at the balance sheet date in accordance with
the provisions of IFRS 3 for business combinations, because a business operation and the related
business processes were acquired. The initial consolidation of Germavest Real Estate S.à.r.l. took
place on October 31, 2015 based on the share of non-controlling shareholders at that time.
Acquisition costs in the amount of EURk 39,016 (including incidental acquisition costs) were incurred
for the purchase of the 94 % interest in Germavest Real Estate S.à.r.l.
The acquisition costs were distributed among the acquired assets and liabilities valued at their
estimated market values as part of the purchase price allocation conducted by an external expert:
EURk
181,320
Other non-current assets
1,026
Current assets
4,359
3,540
Assets acquired
190,245
-104,424
Of which deferred tax liabili-ties
Current liabilities
-7,848
-11,998
Acquired liabilities
-116,422
Net assets (100 %)
73,823
Non-controlling interests
1,590
Negative good-will
33,217
Acquisition costs
39,016
107
108
The allocation of the purchase price to the acquired assets and liabilities is preliminary because the final
purchase price allocation had not yet been performed by the reporting date. The financial statements
of Germavest Real Estate S.à.r.l. for the 2015 reporting period may be subject to changes because the
tax items have not yet received the Company’s final approval. Therefore, the fair values of the acquired
assets and liabilities are preliminary.
The majority of investment properties were appraised as at December 31, 2015 by external real estate
experts. The Company adopted these values as a result of its own assessment as of the acquisition date
of October 31, 2015. Hidden reserves of EURk 60,425 were identified.
In the course of the purchase price allocation, the following hidden reserves and liabilities at Germavest
Real Estate S.à.r.l. were identified:
■
Hidden losses identified included higher fair values of assumed liabilities of EURk 6,481).
■
Contingent liabilities as defined by IAS 37, which should be recognised as liabilities at the time
of first-time consolidation under IFRS 3.22, were not identified.
The transaction costs of EURk 793 related to the business combination were recognised through profit
or loss.
The valuation non-controlling interests was based on their share of the net assets of Germavest Real
Estate S.à.r.l., which at the time of its initial consolidation amounted to EURk 1,590. In measuring the
interests of non-controlling shareholders (minority interests) use of the option under IFRS 3.19 was
made and the interests of non-controlling shareholders were measured using the corresponding share
of the identifiable net assets.
Because the offsetting of acquisition costs plus interests of non-controlling shareholders against
the net assets of the acquired company resulted in negative goodwill, the carrying amounts of the
assets and liabilities acquired and the acquisition cost determined were subjected to another critical
review. Negative goodwill of EURk 33,217 that was determined after a critical review was recognised
immediately through profit or loss as a non-recurring effect under the line item “profits originating
from a purchase below market value”. This amount originates mainly from the fair value in excess of
the purchase price of investment properties held by Germavest Real Estate S.à.r.l.
The gross amount of the trade accounts receivable acquired totalled EURk 12 upon initial consolidation
and no previous impairments were included. Thus, the fair value of trade accounts receivable amounted
to EURk 12. The gross amount of other receivables and assets acquired totalled EURk 4,278 upon initial
consolidation. No impairment has been recognised on these receivables and other assets. Thus, the
fair value of other receivables and assets amounted to EURk 4,278.
If Germavest Real Estate S.à.r.l. had been fully consolidated as at January 1, 2015, net rental income of
EURk 15,945 and profit/loss before taxes of EURk 4,719 would have been included in the consolidated
financial statements.
Net rental income of EURk 2,675 and a consolidated profit before tax of EURk 565 were generated
during the consolidation period (November 1, 2015 to December 31, 2015).
Acquisition of real estate companies
Interests acquired during the fiscal year consist of shares in the real estate project companies
Glockenhofcenter Objektgesellschaft mbH, Berlin; Hanse-Center Objektgesellschaft mbH, Berlin;
TGA Immobilien Erwerb 1 GmbH, Berlin; Sihlegg Investments Holding GmbH, Wollerau, Switzerland;
and Logistikpark Leipzig GmbH, Leipzig. The acquisition of the real estate project companies named
are accounted for as direct purchases of real estate because, in the opinion of the Company’s
Executive Board, these companies do not represent a full business operation pursuant to IFRS 3.
B.7. The purchase of the properties contained in the real estate companies was a component of the
transactions. Therefore, the acquisition costs related to the real estate companies were allocated to
the individually identifiable assets and liabilities on the basis of their fair values as of the acquisition
date. This does not concern a business combination as defined under IFRS 3 (acquisition of aggregated
assets).
In the context of the acquisition of Glockenhofcenter Objektgesellschaft mbH and Hanse-Center
Objektgesellschaft mbH, DEMIRE AG increased its share capital by EUR 5,633,710 against contribution
in kind. Alpine Real Estate GmbH was admitted to subscribe to the new shares and made a contribution
in kind to DEMIRE consisting of 94.9 % of Alpine’s interest in Hanse-Center Objektgesellschaft mbH,
94.9 % of the interest in Glockenhofcenter Objektgesellschaft mbH and a receivable against HanseCenter Objektgesellschaft. The increase in the share capital was entered in the commercial register on
January 22, 2015. The project companies, which were contributed with effect as at February 1, 2015,
possess a combined commercial real estate portfolio consisting of nearly 42,000 m² in the cities of
Bremen, Berlin and Stralsund. In the capital increase, each new DEMIRE AG share was assigned a
value of EUR 1.75, resulting in a calculated total purchase price of EURk 9,859.
In the context of the acquisition of Sihlegg Investments Holding GmbH, DEMIRE AG increased its
share capital by EUR 2,182,567 against contribution in kind. Ketom AG, Wollerau, Switzerland, was
admitted to subscribe to the new shares in return for providing a contribution in kind consisting of
94 % of Ketom AG’s interest in Sihlegg Investments Holding GmbH and a receivable against Sihlegg
Investments Holding GmbH. Sihlegg Investments Holding GmbH is the owner of the office and
retail property Gutenberg Galerie in Leipzig. The interest in Sihlegg Investments Holding GmbH was
acquired with effect as at May 27, 2015. In the context of the capital increase, each new DEMIRE AG
share was assigned a value of EUR 4.03, resulting in a calculated total purchase price of EURk 8,791.
Shares in TGA Immobilien Erwerb 1 GmbH, Berlin, were acquired in a two-step process on March
3, 2015 and May 21, 2015, resulting in a 94 % interest in the company. The purchase price totalled
EUR 468,250. Under a property purchase agreement dated March 25, 2015, TGA Immobilien Erwerb
1 GmbH acquired a property in Schwerin. Beneficial ownership was transferred in July 2015. The
purchase price of the property totalled EURk 4,800.
109
110
To acquire an interest in Logistikpark Leipzig GmbH, DEMIRE AG increased its share capital by
EUR 2,541,149 against contribution in kind. M1 Beteiligungs GmbH, Berlin, was admitted to subscribe
to the new shares in return for a contribution in kind consisting of a 94 % interest in Logistikpark
Leipzig GmbH. In addition to the shares, a cash component of roughly EUR 18.3 million was also
agreed to as part of the purchase price. In the context of the capital increase, each new DEMIRE AG
share was assigned a value of EUR 5.84, resulting in a calculated total purchase price of EURk 33,173.
The entry of the capital increase into the commercial register took place on July 1, 2015. Beneficial
ownership of the interest in Logistikpark Leipzig GmbH was acquired on July 17, 2015.
Based on 100 % of the assets and liabilities and taking into account the interests of non-controlling
shareholders, the following amounts were recognised in the reporting period as at the date of initial
consolidation:
EURk
Assets acquired
Amounts recognised as at the acquisition date
104,928
Liabilities acquired
59,050
Net assets at 100 %
45,878
thereof interests of non-controlling shareholders
Acquisition costs
2,068
43,810
Of the total purchase price of EURk 43,810, an amount of EURk 15,238 was paid in cash during the
reporting year (see Note F).
First-time consolidation of other entities
In the reporting year, companies were acquired or formed for property, asset and facility management
and holding companies were acquired or formed to hold interests in real estate companies and were
consolidated for the first time in the reporting year.
Company
Interest
Date of first-time
consolidation
Demire Immobilien Management GmbH
100 %
01/01/2015
DEMIRE Commercial Real Estate DREI GmbH
100 %
30/06/2015
DEMIRE Commercial Real Estate VIER GmbH
100 %
30/06/2015
DEMIRE Commercial Real Estate FÜNF GmbH
100 %
30/06/2015
DEMIRE Commercial Real Estate SECHS GmbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Erste mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Zweite mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Dritte mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Vierte mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Fünfte mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Sechste mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Siebente mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Achte mbH
100 %
31/12/2015
FVR Beteiligungsgesellschaft Neunte mbH
100 %
31/12/2015
Acquisitions of real estate project companies in the previous year were accounted for as direct
purchases of real estate because, in the opinion of the Company’s Executive Board, these companies
did not represent a business operation as defined by IFRS 3. Therefore, the acquisition costs related to
the project companies were allocated to the individually identifiable assets and liabilities on the basis
of their fair values. This does not concern a business combination as defined under IFRS 3 (acquisition
of aggregated assets).
The following amounts of assets and liabilities (based on 100 % ownership each and taking into account
the 6 % interest of non-controlling shareholders) of Condor Objektgesellschaft Rendsburg GmbH,
Condor Objektgesellschaft Bad Oynhausen GmbH, Condor Objektgesellschaft Lichtenfels GmbH,
Condor Objektgesellschaft Yellow GmbH, all located in Frankfurt/Main, were recognised as at the
acquisition date of September 30, 2014 and of Condor Objektgesellschaft Düsseldorf GmbH, Frankfurt/
Main, as at the acquisition date of December 15, 2014:
EURk
Assets acquired
Non-current assets
Current assets
Total assets
Acquisition costs
48.957
2.072
51.029
2.857
111
112
The entities mentioned above were included in the consolidated financial statements with their assets
and liabilities because the acquisition of the interests in the reporting period did not constitute a
business combination as defined by IFRS 3 (acquisition of aggregated assets).
The following amounts of assets and liabilities (based on 100 % ownership each and taking into account
the 6 % interest of non-controlling shareholders) of GO Bremen ApS Denmark, GO Leonberg ApS
Denmark, GO Ludwigsburg ApS Denmark, Denston Investments Ltd. Cyprus, Alemory 66 Grundstücks
GmbH Germany, Reubescens S.à.r.l. Luxembourg, EOGF Grundstücksgesellschaft mbH Germany,
Blue Ringed S.à.r.l. Luxembourg, Briarius S.à.r.l. Luxembourg, Armstripe S.à.r.l. Luxembourg, were
recognised as at the acquisition date of December 15, 2014:
EURk
Assets acquired
Non-current assets
149,515
Current assets
5,579
Total assets
155,094
Acquisition costs
1,710
and liabilities because the acquisition of the interests in the reporting period did not constitute a business
combination as defined by IFRS 3 (acquisition of aggregated assets). The purchase prices for the real estate
companies acquired on December 15, 2014, included the interests in the companies as well as shareholder
loans belonging to previous shareholders that were assumed by the Company. The recognition of the
shareholder loans below the current carrying amounts was due to the fact that most of the acquired
companies had negative equity, and the shareholder loans were so-called non-performing loans.
The following amounts of assets and liabilities acquired in the context of asset deals (based on 100
% ownership each) of CAM Commercial Asset Management EINS GmbH, CAM Commercial Asset
Management ZWEI GmbH, CAM Commercial Asset Management DREI GmbH, CAM Commercial Asset
Management VIER GmbH, all located in Frankfurt/Main, were recognised as at the acquisition date of
December 31, 2014, and of Schwerin Margaretenhof 18 GmbH, Berlin (taking into account the 5.1 %
interest of non-controlling shareholders):
EURk
Assets acquired
Non-current assets
Current assets
50,254
1
Total assets
50,255
Acquisition costs
42,555
and liabilities because the acquisition of the interests in the reporting period did not constitute a
business combination as defined by IFRS 3 (acquisition of aggregated assets).
The liabilities of the acquired companies were refinanced and mainly replaced by loans for the
acquisition at the acquisition date.
Disposals in the reporting year
The disposals of fully consolidated subsidiaries in the reporting year largely concern the legacy
portfolio and include the following companies: Kappatrade Ltd. (Ukraine), Polartrade Ltd. (Ukraine),
OOO Sadko Holding (Russia), OOO New Sadko Holding (Russia), MAGNAT Real Estate Project Sadko
B.V. (The Netherlands), MAGNAT Real Estate New Project Sadko B.V. (The Netherlands) and Munich
ASSET Vermögensverwaltung GmbH. The disposal of these companies generated a total negative effect
on earnings of EURk 500, mainly as a result of the derecognition of reserves for currency translation
differences attributed to these companies. In addition, a German entity and a Dutch entity contained
in the legacy portfolio were merged in an effort to streamline the Group’s structure.
Date of disposal
Proceeds from
disposal
in EURk
Result from disposal of net assets
(incl. currency
translation reserve)
in EURk
Gains/losses on
disposal
in EURk
Kappatrade Ltd., Kiev, Ukraine
08/04/2015
1,716
-1,570
146
Polartrade Ltd. (Ukraine)
10/06/2015
50
-12
38
OOO Sadko Holding, Moscow, Russia
19/06/2015
0
27
27
OOO New Sadko Holding, Moscow, Russia
30/06/2015
0
14
14
MAGNAT Real Estate Project Sadko B.V.,
Hardinxveld Giessendamm, Netherlands
14/07/2015
0
0
0
MAGNAT Real Estate New Project Sadko
B.V., Hardinxveld Giessendamm,
Netherlands
14/07/2015
0
0
0
Munich ASSET Vermögensverwaltung
GmbH, Frankfurt/Main, Germany
01/10/2015
26
34
60
1,792
-1,507
285
Total
Summary financial information for companies sold (amounts EURk):
Aggregated assets
thereof cash and cash equivalents
Aggregated liabilities
Aggregated assets
Kappatrade Ltd.
Polartrade Ltd.
OOO Sadko Holding
1,881
1,323
43
0
0
2
5,407
3,864
0
MAGNAT Real Estate
Project Sadko B.V.
MAGNAT Real Estate New
Project Sadko B.V.
Munich ASSET Vermögensverwaltung GmbH
0
440
7,539
0
0
2
24
2
7,460
113
114
OOO New Sadko Holding
Aggregated assets
21
0
2
Disposals in prior year
The following entities were sold in the prior year:
Zeitpunkt der
Veräußerung
Veräußerungserlös in TEUR
Veräußerungsgewinn/
-verlust in TEUR
Buchwert
in TEUR
MAGNAT Asset Management
Ukraine Ltd., Kiev, Ukraine
15/12/2014
0
14
-14
R-QUADRAT Ukraine Gamma Ltd., incl. RQ
Gamma LLC*), both in Kiev, Ukraine
30/12/2014
325
-112
437
Zetatrade Ltd., Kiew, Ukraine
30/12/2014
750
0
750
Hekuba S.à.r.l., Luxembourg
End of June 2014
3,700
167
3,533
Summary financial information on companies sold (amounts EURk):
MAGNAT
Asset Management
Ukraine Ltd., Kiew,
Ukraine
R-QUADRAT Ukraine
Gamma Ltd., Kiew,
Ukraine
Zetatrade Ltd., Kiew,
Ukraine
Aggregated assets
4
355
1,676
0
55
0
32
160
1,576
Disclosures according to IFRS 12
a) Disclosures relating to fully consolidated subsidiaries
An overview of subsidiaries in which DEMIRE AG held a direct or indirect interest as at
December 31, 2015 (IFRS 12.10 ff) is provided in Appendix 1.
The direct and indirect interests in the capital of subsidiaries held by DEMIRE AG correspond to the
share of voting rights. The contribution of the non-consolidated entities to the Group’s revenues, net
profit/loss and total assets are considered immaterial. Therefore, these entities are not included in
the consolidated financial statements.
Entity
Fair Value REIT-AG
Type
Registered
office
Fiscal year
Interest in voting capital (%)
Subsidiary
Germany,
Munich
01/01/2015 –
31/12/2015
77.70
Fair Value REIT-AG, Munich, and its subsidiaries were fully consolidated for the first time as of
December 31, 2015, in the consolidated financial statements as the Fair Value REIT subgroup. In this
process, only the assets and liabilities of Fair Value REIT were consolidated in DEMIRE’s consolidated
financial statements, which led to the disclosure of the following information in accordance with
IFRS 12.12 in consideration of IFRS 3 (see Note B “Changes in the scope of consolidation”) as of
December 31, 2015:
Fair Value REIT-AG
31/12/2015
TEUR
Balance Sheet
Non-current assets
297,181
Current assets
33,452
16,028
187,738
thereof interests of minority shareholders
61,160
Current liabilities
24,857
thereof financial debt
18,118
Net assets
117,278
Statement of income
Revenue
29,847
Interest income
11
Interest expense
4,212
Income taxes
0
Other income
0
6,585
Reconciliation
Net assets of fully consolidated subsidiary at the beginning of the fiscal year
78,273
Net profit
6,585
Net assets of fully consolidated subsidiary as at Dec. 31
117,278
Group’s interest in %
77,70
Interest in the net assets of the fully consolidated subsidiary
91,125
Deferred tax assets
-4,739
Goodwill
6,783
Investment’s carrying amount
93,125
With respect to the creation of deferred tax liabilities and goodwill in connection with the acquisition of
shares in Fair Value REIT-AG, we refer to Note B “Changes in the scope of consolidation”.
b) Disclosures relating to associated companies
The interests in associated companies accounted for using the equity method had the following
effect on the DEMIRE Group’s balance sheet and statement of income.
Company
SQUADRA Immobilien GmbH & Co. KGaA
Russian Land AG
Carrying amount as at
31/12/2015
EURk
Carrying amount as at
31/12/2014
EURk
3,020
1,592
0
23
3,020
1,615
115
116
The following provides information relating to interests in associated companies assessed as material.
Company
SQUADRA Immobilien GmbH &
Co. KGaA
Type
Registered office
Fiscal year
Interest in capital
(%)
Associated company
Germany Frankfurt/
Main
01/01/2015 –
31/12/2015
24.78
The summary financial information on the Group’s material associated companies is provided below.
The financial information provided corresponds to the amounts of the subgroup financial statements
of SQUADRA Immobilien GmbH & Co. KGaA as of December 31, 2015 prepared for the purpose of
inclusion in DEMIRE’s consolidated financial statements under IFRS.
31/12/2015
EURk
31/12/2014
EURk
20,575
12,606
5,922
397
Balance sheet
Non-current assets
Current assets
3,532
74
1,467
0
Current liabilities
6,604
340
6,147
93
18,426
12,663
122
129
Depreciation/amortisation
6
9
Interest income
0
0
Interest expense
0
0
Income taxes
0
0
Profit from fair value adjustments in investment properties (previous year: loss)
9,223
100
1,980
421
Deferred tax expenses (previous year: tax benefit)
1,460
32
Net assets
Statement of income
Revenue
Other income
0
0
5,763
-508
12,663
13,171
5,763
-508
Reconciliation
Net assets of associated company at the beginning of the fiscal year
Net profit/loss
Net assets of associated company at December 31
18,426
12,663
24,78
24,78
Interest in the net assets of the associated company
4,566
3,138
Decrease from reverse acquisition
1,546
1,546
3,020
1,592
c) Disclosures relating to joint ventures
The interests in joint ventures had the following impact on the DEMIRE Group’s balance sheet and
statement of income:
Company
Carrying amount
as at
31/12/2015
EURk
Carrying amount
as at
31/12/2014
EURk
0
869
OXELTON ENTERPRISES Limited
R-Quadrat Polska Alpha Sp. z o.o.
Irao MAGNAT 28/2 LLC
Irao MAGNAT Gudiashvili LLC
0
0
116
129
0
0
116
998
A subsidiary of DEMIRE held 60 % of OXELTON ENTERPRISES Limited (indirect interest of the DEMIRE
Group: 59.78 %). The underlying project includes the building rights to a corresponding property in
Kiev with an existing permission for the construction of an office building and commercial property.
Construction has not yet started. This interest was sold during the reporting year.
DEMIRE holds a 50 % interest in R-QUADRAT Polska Alpha Sp. z o.o. The underlying project is located
in the centre of Kąty Wrocławskie. The initial plan was for a three-stage construction project to build
residential dwellings and commercial areas with roughly 77,700 m² of usable living space. Two of the
three construction sections have been completed.
A subsidiary of DEMIRE holds a 50 % interest in Irao MAGNAT 28/2 LLC (interest of the DEMIRE Group:
49.82 %). A building containing apartments, a penthouse and commercial units was constructed
together with a local partner.
A subsidiary of DEMIRE holds a 50 % interest in Irao MAGNAT Gudiashvili LLC (interest of the DEMIRE
Group: 50 %). The intention was to develop the “Gudiashvili Square” project in Tbilisi together with a
local partner. For this purpose, the project company acquired the existing building and started with the
revitalisation. During the fiscal year, DEMIRE and the local partner jointly decided to exit the project.
DEMIRE’s interest in the transferred profit or loss according to the annual or interim financial statements
of the joint ventures is as follows:
Company
Profit/loss for the
period
01/01/2015 –
31/12/2015
EURk
Profit/loss for the
period
01/01/2014 –
31/12/2014
EURk
R-Quadrat Polska Alpha Sp. z .o.o.
0
0
0
0
0
0
0
199
0
199
117
118
The following table lists the joint ventures classified as immaterial.
Company
Type
Registered office
Fiscal year
Interest in capital
(%)
Joint venture
Tbilisi, Georgia
01/01/2015 –
31/12/2015
50
Joint venture
Tbilisi, Georgia
01/01/2015 –
31/12/2015
50
Summary financial information
31/12/2015
EURk
31/12/2014
EURk
Group’s share in profit/loss from continuing operations
0
0
Group’s share in profit/loss after taxes from discontinued operations
0
0
Group’s share in other comprehensive income
0
0
Total comprehensive income (profit/loss)
0
0
31/12/2015
EURk
31/12/2014
EURk
116
998
Carrying amounts
Total carrying amounts
Unrecognised losses
31/12/2015
EURk
31/12/2014
EURk
Unrecognised losses of the period
4
4
Accumulated unrecognised losses
45
41
The following provides information relating to interests in associated companies assessed as material:
Company
R-Quadrat Polska
Alpha Sp. z .o.o.
Type
Registered office
Fiscal year
Interest in capital
(%)
Joint venture
Warsaw, Poland
01/01/2015 –
31/12/2015
50
The summary financial information on the Group’s material joint ventures is provided below. The
financial information provided corresponds to the amounts of the financial statements prepared by
the associated companies:
31/12/2015
EURk
31/12/2014
EURk
0
1
3,573
3,664
202
74
0
0
Balance Sheet
Non-current assets
Current assets
Current liabilities
Net assets
15,678
14,990
-12,105
-11,325
409
828
1
3
Statement of income
Revenue
Interest income
Interest expense
Income taxes
0
0
668
726
0
0
-771
-1,154
-11,325
-10,491
-771
-1,154
-9
320
-12,105
-11,325
50,00
50,00
-6,052
-5,663
0
0
Reconciliation
Net profit/loss
Change in currency translation reserves
119
120
The following table provides a reconciliation to the carrying amount as at December 31, 2014. A
reconciliation of the carrying amount of OXELTON ENTERPRISES Limited as at December 31, 2015 was
waived because the interest was sold during the reporting year (see Note B “Disposals in the reporting
year”.
31/12/2015
EURk
31/12/2014
EURk
Non-current assets
0
12,200
Current assets
0
3,419
0
16
Balance Sheet
Current liabilities
0
5,919
0
5,919
0
859
0
741
0
8,841
Revenue
0
810
0
0
Interest income
0
0
Interest expense
0
395
Income taxes
0
0
0
331
Net assets
Statement of income
Reconciliation
0
8,841
Net profit/loss
0
331
Change in currency translation reserves
0
-1,779
Impairments
0
-1,810
0
5,583
0
60,00
0
3,350
Decrease from reverse acquisition
0
-2,481
0
869
2. Principles of consolidation
The financial statements of DEMIRE’s subsidiaries are prepared using uniform accounting policies as at
the same balance sheet date as that of the parent company.
The consolidated financial statements include DEMIRE AG and the subsidiaries controlled by it from the
date of acquisition, i.e. from the date on which control was assumed.
The Group controls an investee only when all of the following conditions have been met:
■The Group exerts control over the investee (i.e. based on currently existing rights, the Group
has the option to control those activities of the investee that have a significant influence on the
investee’s return);
■
the Group has risk exposure or rights to variable returns from its involvement in the investee;
and
■
it has the option to exert its control over the investee to influence the amount of the investee’s
returns.
If the Group does not hold the majority of voting or similar rights on an investee, the Group considers
all facts and circumstances when assessing whether it has control over the investee. This includes an
assessment of
■
contractual agreements with others exercising voting rights;
■
rights resulting from other contractual agreements; and
■
voting rights and potential voting right of the Group.
Subsidiaries are consolidated from the date control is assumed by the Group and are no longer
consolidated from the date control ceases. The subsidiary’s assets, liabilities, income and expenses that
were acquired or sold during the reporting period, are included in the balance sheet and statement
of comprehensive income from the date the Group assumes control over the subsidiary until the date
control ceases.
Transactions through which the share of interest in a subsidiary changes without giving up control
over the subsidiary are recognised as equity transactions. If a parent company loses control over a
subsidiary, the following bookings are posted:
■
derecognition of the assets (including goodwill) and liabilities of the subsidiary
■
derecognition of the carrying amount of interests of non-controlling shareholders in the
former subsidiary
■
derecognition of accumulated currency translation differences recognised in equity
■
recognition of the fair value of the consideration received
■
recognition of the fair value of the remaining interest
■
recognition of profits/losses in the statement of income
121
122
■
reclassification of the components of other comprehensive income attributable to the parent
company into the statement of income or retained earnings as if the Group had directly
disposed of the corresponding assets and liabilities
In the case of acquisitions, DEMIRE assesses whether the acquisition constitutes a business combination
according to IFRS 3 or the acquisition of a group of assets and liabilities (as aggregated assets).
Business combinations under IFRS 3 are accounted for using the purchase method. Under this method,
all hidden reserves and liabilities of the acquired assets and liabilities are disclosed as part of the
revaluation. Assets or disposal groups classified as held for sale are measured at their fair value less
costs to sell. In business combinations under IFRS 3, the cost of an acquisition are distributed over
the acquired, individually identifiable assets, liabilities and contingent liabilities according to their fair
values as at the acquisition date (purchase price allocation). Any remaining difference between the
acquisition cost plus shares of non-controlling shareholders and the net assets acquired is recorded as
goodwill. In the case of any remaining negative difference, the carrying amounts of assets and liabilities
acquired and the acquisition cost determined are first subjected to a further critical review.
If after this review any negative difference remains, the amount is recognised as a gain in the
comprehensive statement of income. Transaction costs are directly offset with equity.
Interests in the net assets of subsidiaries that are not attributable to DEMIRE are reported as a separate
equity component in the line item interests of non-controlling shareholders.
The acquisition of real estate project companies that do not constitute a business as defined in IFRS 3,
is depicted as a direct acquisition of a group of assets and liabilities (acquisition of aggregated assets) in
the context of an asset deal. For this reason, the individually identifiable assets acquired and liabilities
assumed are identified and recognised as an acquisition of aggregated assets in accordance with IFRS
3.2b. The acquisition costs of the group of assets are to be allocated to the individually identifiable
assets and liabilities at the date of acquisition based on their fair value. This type of transaction or event
does not create goodwill or a difference from capital consolidation.
The purchase of other companies is accounted for in the context of capital consolidation using the
purchase method by offsetting the acquisition costs of the interests with the proportional revalued
equity of the subsidiaries at their date of acquisition. Upon initial consolidation, the conditions
prevailing on the date when the interests in the consolidated subsidiary are acquired are generally
taken into consideration. Any subsequently resulting differences are allocated to the assets and
liabilities insofar as their fair values differ from the carrying amounts in the financial statements. In
subsequent periods, identified hidden reserves are carried in line with the corresponding assets and
liabilities. Any remaining positive difference from capital consolidation is recognised as goodwill, and
any remaining negative difference is recognised through profit and loss.
If other (non-Group) shareholders hold an interest in the subsidiary’s equity on the balance sheet
date, this item is allocated to interests of non-controlling shareholders. In determining the amount of
the Group net profit/loss attributable to the interests of non-controlling shareholders, consolidation
effects recognised through profit and loss are also taken into account.
Moreover, in the subgroup of Fair Value REIT, there are interests of non-controlling shareholders
(minority interests), relating to the capital of limited partners of predominantly natural persons in
real estate funds in the legal form of a GmbH & Co. KG. These non-controlling shareholders have the
right to terminate their participation. Therefore, the interests of these shareholders in the subsidiaries’
share capital are considered under IAS 32 as potential compensation claims and recognised in the
consolidated balance sheet under liabilities. They are measured at fair value upon the initial recognition,
which corresponds to the interest of the non-controlling shareholder in the net asset value of the
respective company. The reported liability is, therefore, equivalent to the notional interest of the noncontrolling shareholders in the net assets of the respective subsidiary recognised at their carrying
amount in Fair Value REIT subgroup’s consolidated balance sheet.
Intragroup revenues, expenses and income, and all receivables and liabilities between consolidated
companies are eliminated.
Associated companies and joint ventures are consolidated using the equity method. According to the
equity method, these types of interests are consolidated when DEMIRE exerts significant influence over
these interests through an ownership interest generally between 20 % and 50 %. Under equity valuation,
the acquisition costs are annually increased or decreased by the changes in equity of the investment
company attributable to the Group. Any differences arising from the first-time consolidation of
companies using the equity method are treated in accordance with the principles of full consolidation.
Gains and losses from transactions between fully consolidated companies and associated companies
or joint ventures are eliminated in proportion to the Group’s share in the investee.
The Fair Value REIT-AG subsidiaries BBV 02, BBV 10 and IC 15, of which Fair Value REIT-AG holds an
interest of 40 % – 50 %, are fully consolidated in the Company’s consolidated financial statements
because of the defacto control exercised over these subsidiaries. For further information and
explanations on the inclusion of these companies, please see Note A.6.
Currency translation
The consolidated financial statements are prepared in euro (EUR). All financial information presented in
EUR are rounded to euro thousands unless otherwise indicated. When rounding to EURk, discrepancies
may occur.
The functional currency concept is applied for consolidated companies whose financial statements are
prepared in foreign currencies. Pursuant to IAS 21 (The Effects of Changes in Foreign Exchange Rates),
assets and liabilities denominated in foreign currencies are translated into the euro reporting currency
at the rate prevailing on the balance sheet date, and expenses and income are translated on the basis
of year-average exchange rates.
123
124
In the case of subsidiaries and companies accounted for using the equity method that prepare their
financial statements in foreign currencies, the functional currency is determined on the basis of the
economic environment in which the respective company operates.
In the period under review, the financial statements of some companies accounted for using the equity
method were not prepared in the reporting currency of the euro. Insofar as these companies were
included in the consolidated financial statements using the equity method, the proportional equity was
translated into the reporting currency applying the functional currency concept. Proportional profits/
losses were translated at year-average rates.
Currency translation differences are recognised in other comprehensive income and totalled EURk -57
as of the reporting date (previous year: EURk -3,348).
C. Accounting policies
The consolidated financial statements were prepared based on the assumption of a going concern.
In the opinion of the Executive Board, there is no intention or need to discontinue business activities.
Assets and liabilities are presented according to their terms (due in more than/less than one year).
Deferred taxes are generally reported as non-current.
The statement of income is structured according to the recommendations of the European Public Real
Estate Association (EPRA).
Assets are generally measured at the cost of acquisition or production, except for the fair value
measurement of investment properties pursuant to IAS 40 and the measurement of interest swaps.
Goodwill and other intangible assets
Upon initial recognition, individually acquired intangible assets are measured at their acquisition cost.
Subsequently, intangible assets with a limited period of use are amortised on a straight-line basis
usually over a period of three to five years based on their estimated useful economic life and are tested
for possible impairment when there are any relevant indications thereof. Impairment of intangible
assets is recognised in profit or loss.
Intangible assets with an indefinite useful life are not subject to scheduled amortisation. These assets
are subjected to an impairment test at least once annually either on the basis of the individual asset
value or as a cash-generating unit. An impairment test is also carried out when an event impairing
value occurs.
» Scope and principles of consolidation | Accounting policies
Other intangible assets include acquired software and other purchased intangible assets, which
are amortised on a straight-line basis over a period of three to four years according to their useful
economic life.
Upon initial consolidation, goodwill is measured at acquisition cost, which calculated as the excess of
the sum of the consideration transferred, the amount of non-controlling interests and any previously
held interests over the acquired identifiable assets and assumed liabilities of the Group. After initial
recognition, goodwill is measured at acquisition cost less accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in the context of a business combination is allocated
to the Group’s cash-generating units that are expected to benefit from the merger as of the purchase
date.
Property, plant and equipment
Property, plant and equipment is measured at the cost of acquisition or cost of production, less
accumulated scheduled depreciation. Operating and office equipment is depreciated based on the
straight-line method using useful lives of three to fifteen years. Advance payments made on property,
plant and equipment are recognised at their nominal value.
Impairment of non-financial assets
Assets, as defined by IAS 36.1, are tested for impairment if circumstances or changes to circumstances
suggest that their carrying amounts may no longer be recoverable. An impairment loss is recognised in
profit or loss if the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of either the asset’s net realisable value or value in use. The net realisable value is the asset’s
estimated sale proceeds achievable in the normal course of business less the estimated selling costs.
The recoverable amount is the higher of either the asset’s fair value less selling costs or its value in use.
The fair value less selling costs is the amount achievable when an asset is sold on normal market terms
between knowledgeable, willing parties, less selling costs.
A reversal of impairment loss of previously impaired assets is mandatory if the reason for the
impairment loss no longer exists. The only exception to this regulation is an impairment loss applied to
goodwill, where reversals of impairment losses are expressly prohibited.
Financial assets and liabilities
Financial assets and financial liabilities are classified upon their initial recognition according to the
categories of IAS 39 and accounted for accordingly.
DEMIRE classifies financial assets as either
■
financial assets measured at fair value through profit or loss,
125
126
■
loans and receivables,
■
held for sale financial assets, or
■
derivative financial instruments that meet the requirements for an effective hedge transaction.
Financial assets held for trading purposes and financial assets held to maturity are not recognised.
DEMIRE classifies financial liabilities as either
■
other financial liabilities measured at amortised costs,
■
financial liabilities measured at fair value, or
■
derivative financial liabilities that meet the requirements for an effective hedge transaction.
The Company primarily holds financial instruments at amortised cost under the categories of loans and
receivables and financial liabilities. Financial assets and financial liabilities are initially recognised in
the balance sheet when a Group company becomes a contracting party to the financial instrument. The
initial recognition of a financial instrument is carried out at fair value, including possible transaction
costs.
“Loans and receivables” contain non-derivative financial assets with fixed or determinable payments that
are not listed on an active market. At the time of initial measurement, loans and receivables, including
any transaction costs, are measured at fair value. Subsequently, they are measured at amortised cost
using the effective interest method, less any impairment losses. Non- and low-interest-bearing noncurrent receivables are carried at their present value. Under this category, DEMIRE includes loans to
investments accounted for using the equity method, trade accounts receivable and other receivables
(except for receivables from income taxes and value-added taxes), as well as financial receivables.
DEMIRE uses derivative financial instruments to hedge against interest rate risk. At the date on which
the corresponding loan agreements were concluded, the derivative financial instruments are initially
recognised at their fair values and subsequently measured at their fair values. The provisions of IAS 39
for hedge accounting do not apply. Derivative financial instruments are carried as assets when their
fair value is positive and as liability when their fair value is negative. Their valuation is derived using
the mark-to-market method, taking into account the market data on the balance sheet date. Gains
or losses from changes in fair values of derivative financial instruments are recognised immediately
through profit or loss.
» Accounting policies
Under a shareholder agreement between DEMIRE AG and Dovemco Ltd. (“Dovemco”) signed in April
2015, an “earn-out” agreement was agreed for the underlying CONDOR portfolio. This agreement is
based on a combination of call/put options with different strike prices that can be exercised only when
certain budget targets are achieved. This combination is generally classified as a financial liability in the
form of a derivative. Due to the fact that the thresholds for exercise have not yet been reached and are
expected clearly not to be reached in the future, the obligation is valued at “zero”.
“Other financial liabilities” are non-derivative financial liabilities that are subsequently measured at
amortised cost. Differences between the amount received and the expected repayment amount are
recognised over the term in profit or loss. DEMIRE allocates financial debt, trade accounts payable and
other liabilities to this category.
Interests in affiliated and associated companies that are neither fully consolidated nor consolidated
using the equity method due to their minor significance are recognised at acquisition costs less any
impairment since the fair values of these assets cannot be reliably determined. These assets consist of
non-listed interests for which there is no active market available. This mainly concerns non-consolidated
subsidiaries active in the real estate sector that have only minor business activities.
The Company derecognises a financial asset when it has expired due to payment or when the payment is
no longer anticipated. Financial liabilities are derecognised if these are redeemed, i.e. if the contractual
obligations have been settled, waived or have expired.
Impairment of financial assets
If there is an objective indication on the balance sheet date that an impairment of loans and receivables
recognised at amortised cost has occurred, the amount of the impairment is assessed as the difference
between the carrying amount of the asset and the present value of the expected future cash flows (with
the exception of expected future loan defaults that have not yet occurred) and discounted applying
the original effective interest rate of the financial assets (i.e. the effective interest rate calculated upon
initial recognition).
The asset’s carrying amount is reduced utilising the valuation adjustment account, and the impairment
is recognised through profit or loss.
It is first determined whether there is an objective indication of an impairment of financial assets that
are individually considered to be significant or to financial assets that are not individually or collectively
considered to be significant. Whether the asset is significant or not, if the Group determines that there
is no objective indication of an impairment of an individually tested financial asset, it assigns the asset
to a group of financial assets with similar default risk characteristics and collectively tests them for
impairment. Assets that are tested individually for impairment and for which an impairment loss is
recognised are not included in the collective impairment assessment.
127
128
If the amount of impairment loss decreases in one of the subsequent reporting periods and the
decrease can be related objectively to a circumstance arising after the impairment was recognised,
the previously recorded impairment loss is reversed. The amount of the reversal is limited to the
amortised cost as at the date of the reversal. The reversal is recognised through profit or loss in the
loans and receivables measurement category. If there are objective indications (such as the probability
of insolvency or significant financial difficulties on the part of the debtor) that not all trade accounts
receivable will be collected under the original payment terms, an impairment loss is applied using a
valuation adjustment account. The amounts in the valuation adjustment account are derecognised
against the carrying amounts of the impaired financial asset if they are classified as uncollectible.
Classification of net gains and losses
Net gains and losses from loans and receivables primarily consist of interest income as well as the
corresponding impairments and impairment reversals on these financial assets and gains and losses
from currency translation. Net gains and losses from financial liabilities include not only interest
expenses but also gains and losses from currency translation.
Interests in companies in which DEMIRE can exert significant influence but does not possess control
are recognised using the equity method pursuant to IAS 28. Interests in joint ventures are also
recognised using the equity method pursuant to IFRS 11. Interests in investments accounted for using
the equity method are initially recognised at cost. The difference between the acquisition costs and the
proportionate share of equity represents goodwill. The carrying amount of the interest subsequently
increases or decreases according to the owner’s interest in the net profit for the period (including
currency translation) of the investments accounted for using the equity method. The equity method is
no longer applied when significant influence has ended or when the company is no longer classified as
an associated company or joint venture. If at the same time, assets exist against investments accounted
for using the equity method for which settlement is neither planned nor likely, then these assets are
allocated, according to their economic substance, to the net investment in the investments accounted
for using the equity method.
After applying the equity method, the Group determines whether an additional impairment is required
for the Group’s interest in the investments accounted for using the equity method. On each balance
sheet date, the Group determines the extent to which there are objective indications that an interest
in an investment accounted for using the equity method has been impaired. If this is the case, any
difference between the carrying amount and the recoverable amount (the higher of either the value
in use or the fair value less costs to sell) is reported through profit or loss as an impairment loss.
When the reasons for a previously recognised impairment loss no longer exist, the impairment loss is
reversed accordingly.
Measurement at fair value
Assets, equity and debt instruments (excluding share-based payments under IFRS 2) that are measured
at fair value based on other standards are valued uniformly according to the provisions of IFRS 13.
IFRS 13.9 defines fair value as the price in a normal transaction between market participants at the
measurement date that would be received for the sale of an asset or paid to transfer a liability. Fair
value generally assumes the sale of an asset even if the company has no intention or the capacity to
sell the asset or transfer the liability as at the valuation date. The fair value of non-financial assets
is determined based on the highest and best possible use. This stipulates the intention to maximise
the benefit and value of the asset, to the extent that this is technically possible, legally permissible
and financially feasible. It is irrelevant whether the fair value is directly observable or determined by
applying a valuation method.
If fair value is determined using a valuation method, the fair value should be assigned to one of the
following three levels of the fair value hierarchy depending on the available observable parameters
and the respective importance of these parameters for the overall measurement:
Level 1: Input factors are quoted (unadjusted) prices in active markets for identical assets or
liabilities that are available as at the valuation date.
Level 2:Other input factors than the quoted prices in Level 1 and factors which are either directly
observable or can be indirectly derived for the asset or liability.
Level 3: Input factors for the asset or liability are not observable.
To determine the point in time at which a reclassification between the different hierarchy levels is
considered to have occurred, the Company uses the time of the event or of the change in circumstances
that caused the reclassification.
The measurement of investment properties at fair value is classified to Level 3 of the valuation hierarchy
pursuant to IFRS 13.86, due to unobservable inputs. For an explanation of the measurement, please
refer to Note C. Accounting and valuation parameters for investment properties. Details on the other
valuation techniques and input factors used for determining the fair value of the various assets and
liabilities can be found under Note E and Note I.1.
129
130
The result is the following fair value hierarchy:
Fair value hierarchy
Level 1
Level 2
Level 3
x
x
Financial debt
x
Derivatives
x
Investment properties include real estate that is held to generate rental income and capital appreciation
and not for the Company’s own use or for its sale in the ordinary course of business. Investment
properties currently consist solely of commercial properties. Advance payments for purchases of real
estate are recognised in “advance payments” under property, plant and equipment.
Investment properties are derecognised when they are sold or are no longer permanently used and a
disposal is not expected to yield a future economic benefit. Any resulting gains or losses are recognised
in the year of disposal or retirement. Investment properties are transferred when a change in utilisation
through owner-occupation occurs or when the disposal process is initiated.
The initial recognition of investment properties is carried out at the cost of acquisition or production,
including incidental acquisition costs. In subsequent accounting, investment properties are measured
at fair value pursuant to IAS 40 in conjunction with IFRS 13.9. Their appraisal is carried out in accordance
with the International Financial Reporting Standards (IFRS), the International Standards of Valuation
of Real Estate for Investment Purposes (“International Valuation Standards”) and the RICS Valuation Professional Standards (January 2014) of the Royal Institution of Chartered Surveyors.
Gains and losses resulting from the adjustments in fair value are reported as income or expenses
under “profit/loss from fair value adjustment in investment properties” in the consolidated statement
of income.
The fair values of investment properties were determined by independent external experts using
recognised appraisal methods. The commissioned experts possess the relevant professional
qualifications and experience necessary to conduct the appraisals. The expert opinions are based on
information provided by the Company such as current rents, maintenance costs, remaining useful
lives and current vacancies as well as on assumptions of the experts, which are based on market data
and which were assessed by the expert based on his professional qualification, such as rental trends,
discount rates and capitalisation rates. The best possible use of the respective properties is assumed
when calculating the properties’ value.
The determination of the fair value of investment properties is made annually by external and
independent experts and is based on appraisals conducted in accordance with international valuation
standards. The valuation method used for investment properties of the DEMIRE subgroup is the
discounted earnings model pursuant to the Property Valuation Ordinance and, if available, based
on comparative or market prices. Investment properties held by the Fair Value REIT subgroup are
measured using the discounted cash flow method.
Due to the long-term nature of investment properties, the determination of the fair value of investment
properties under the discounted earnings method or the discounted cash flow method is subject to
uncertainties that could lead to positive as well as negative changes in value in future. Measurement
under IAS 40 is based on assumptions and expectations by the Company’s management that may differ
from actual developments. Should there be a significant increase in the vacancy rate or in the currently
low interest rate, the result would be a decrease in the portfolio’s overall fair value. Had the Company’s
management chosen the acquisition cost model as permitted under IAS 40, the carrying amounts of
investment properties and the corresponding income and expense items would substantially differ.
Valuation of real estate held by the DEMIRE subgroup
Fair values for investment properties held by the DEMIRE subgroup are determined on the basis
of discounted earnings models in accordance with the Federal Building Code (Baugesetzbuch), the
Property Valuation Regulation (Immobilienwertermittlungsverordnung [ImmoWertV]) and the Valuation
Guidelines (Wertermittlungsrichtlinie [WertR]). The property’s net present value is determined based
on income and expenditures taking a risk-adjusted property yield into account.
The net present value consists of the sum of the property’s earnings value and the land value based on
rentable space, taking attainable local rents (excluding utilities) into account and assuming sustainable
occupancy/vacancy rates, which are predominantly influenced by local market supply and demand.
Attainable rental income is compared to the operating costs necessary to maintain the properties in
a rentable condition. The necessary investment is dependent upon the property’s current condition
and is based on the expert appraisal with regard to future investment while taking into account the
actual investments required in the past, the customary maintenance costs recommended in specialist
literature and expert estimates. A multiple which is based on property yields and remaining useful lives
is applied to the net present value. Property yields are determined by local/regional expert committees
of the municipalities and are positively or negatively impacted by the property’s vacancy rate relative
to the location. The land value (area * land value/m²) is added to the net present value. The sum of net
present value and land value totals the fair value. All expert opinions are based on an on-site visit to
the property.
The fair values of investment properties determined using the discounted earnings model equal the
net values making it unnecessary to eliminate transaction costs.
131
132
The determination of the net present values depends on underlying key, unobservable input factors
used in the valuation (Level 3):
Office real estate
31/12/2015
31/12/2014
7.26
7.78
Ratio of maintenance costs to gross profit (in %)
Average maintenance costs (in EUR per m2)
6.38
Range of maintenance costs (in EUR per m2)
2.36
6.25
10.00
4.00
9.75
5.00
9.17
6.09
Average property yield (in %)
1)
5.82
5.00
Range of property yields (in %)2)
Average residual useful life (in years)
8.75
37
Range of residual useful life (in years)
40
25
45
Ratio of management costs to gross profit (in %)
Range of ratio of management costs to gross profit (in %)
45
3.42
0.99
7.53
2.53
161.17
30.47
96.22
Average market rent (in EUR per m2, per year)
3)
Range of average market rents (in EUR per m2, per year)
30
3.09
30.47
6.32
96.87
150.01
Rentable space as at balance sheet date (in m²)
470,143
269,885
Vacant space as at balance sheet date (in m²)
39,025
41,242
Value-based vacancy rate according to EPRA (in %)
8.32
14.30
Average vacancy rate based on the rentable space (in %)
8.30
15.28
Range of average vacancy rate based on the rentable space (in %)
0.00
67.27
Weighted Average Lease Term – WALT (in years)
0.00
6.04
82.00
6.28
1
The calculation of property-specific property yields is based on the average market property yield and takes into account the respective macro and
micro conditions, competing properties, tenant creditworthiness, vacancy risk and the remaining terms of the lease contracts.
2
Property yields derived vary based on the quality, location and structure of the property.
3
The determination of average market rent was based on rentable space as at December 31, 2015.
Retail real estate
31/12/2015
31/12/2014
11.64
3.72
6.83
5.00
5.00
7.50
5.00
7.25
5.50
6.62
1)
5.50
6.00
5.00
5.50
39
35
35
45
7.40
2.96
134.53
134.41
70.63
35
2.96
2.86
3)
35
4.08
47.07
2.96
134.41
21,616
134.41
3,973
3,410
0,00
12.18
0.00
15.77
0.00
0.00
46.70
8.10
0.00
0.00
5
1
2
3
Logistics1) real estate
31/12/2015
19.55
3.59
3.59
3,59
8.00
Average property yield (in %)2)
8.00
8,00
25
25
25
1.77
1.77
1,77
26.46
Average market rent (in EUR per m2, per year)4)
26.46
26,46
218,697
66,978
30.63
30.63
30.63
1
30.63
2.42
Information concerns Logistikpark Leipzig, which was acquired in the reporting year.
2
3
4
Others
31/12/2015
31/12/2014
15.67
13.16
4.02
4.02
4.00
6.50
4,00
10.25
6,75
6,50
9.35
1)
6.75
8.38
9,25
25
30
25
25
35
3.38
2.25
6.63
2,26
64.78
11,50
40.81
3)
30
3.70
12.06
6,68
40.48
64,83
92,735
78,529
34,335
19,084
32.81
21.09
37.03
24.30
0.00
86.62
2.50
0,00
82,32
4.99
1
2
3
133
134
Valuation of real estate held by the Fair Value REIT subgroup
The valuation method used for investment properties of the Fair Value REIT subgroup is the discounted
cash flow model.
The discounted cash flow method is the basis of dynamic investment calculations and is used to
calculate the net present value of future expected time-staggered, varying levels of cash flows. After
identifying all value-relevant factors, the expected future, partly forecast-linked cash flows are totalled
on an accrued basis. The result of the cash inflows and outflows are discounted to a fixed point in
time (valuation date) using the discount rate. In contrast to the German discounted earnings model of
the Valuation Ordinance (WertV), the cash flows during the period under consideration are explicitly
quantified and not shown as an annuity payment. As a result of discounting, the influence of future cash
flows decreases as the forecasting insecurity increases over the observation period. Therefore, when
considering an investment in real estate, usually the stabilised net income is capitalised using a growth
implicit minimum interest rate (capitalisation rate) based on a 10-year period (detailed observation
period) and discounted to the valuation date.
The assumptions used in the valuation model reflect the average assumptions prevailing on the market
from key investors on the respective valuation date. These valuation parameters reflect the standard
market expectations and the extrapolation of the analysed past figures of a property or several
comparable properties to be appraised.
The valuation parameters are estimated by the appraiser at his/her discretion within the framework of
the fair value calculation and can be divided into two groups:
The property-specific valuation parameters include, for example, rental income for initial and
subsequent rentals, probability of extension of existing rentals, vacancy periods and vacancy costs,
unallocable incidental costs and expected capital expenditure of the owner, expansion as well as rental
costs for initial and subsequent rentals or a property- or rental-specific total rate of return on invested
capital.
Macroeconomic factors include, in particular, the development of market prices and rent during the
detailed observation period and the inflation expectations assumed in the calculation model. To comply
with fair value disclosure requirements, the Group has determined classes of assets and liabilities
based on their nature, characteristics and their risks and the levels of the fair value hierarchy above.
The Group’s management is significantly involved in and closely monitors the process of investment
property valuation, which takes place at least once per year. This includes comparing prior years’
results with the results provided by independent appraisers as part of an initial plausibility review.
Valuation results and the Company’s own assumptions based on early risk detection risk are carefully
scrutinised, and any deviations from the results of the external appraiser are discussed. The portfolio’s
development is also discussed in regular meetings with the Supervisory Board, which ensures that the
property portfolio’s value is continuously monitored.
The determination of fair values is based on the following underlying key, unobservable input factors
(Level 3):
31/12/2015
94.11
Average market rent (in EUR per m2 per year)1)
Range of average market rents (in EUR per m2)
0.00
232.97
264,887
28,713
10.31
10.84
0.00
1
63.51
4.86
The basis for rental revenue planning is the rental payments contractually agreed with the tenants and
the prevailing customary local market rents for unlet space as at the valuation date. The contractually
agreed rent per square meter and month reported as at the valuation date for the different types of
properties compared to the previous year is as follows:
Contractual rents (EUR)
Office property
Retail property
Others
Total
31/12/2015
Min.
2.50
Max.
25.80
Avg.
6.10
Min.
2.50
Max.
90.00
Avg.
7.97
Min.
2.00
Max.
11.60
Avg.
5.46
Min.
2.00
Max.
90.00
Avg.
6.92
The resulting changes in value (valuation gains and losses) are derived primarily from the adjustment
in capitalisation and discount rates and fewer advantages from some of the existing leases that were
concluded at yields above those in the current market (so-called over-rents).
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Real estate inventory is recognised in accordance with IAS 2 (see Note A.6). Real estate inventory is
recognised at the lower of acquisition or production cost and net realisable value. The net realisable
value is the estimated sales proceeds achievable in the normal course of business less the estimated
costs until completion and estimated sales costs. Acquisition/production cost includes directly
attributable unit costs and general overhead costs attributable to the production process.
The net realisable value is newly determined in each subsequent period. If the circumstances that had
previously led to an impairment of the inventory’s value to a level below its acquisition or production
cost no longer exists, or if there is a substantive indication of an increase in the net realisable value
due to a change in economic circumstances, then the amount of the impairment is reversed to the
extent that the new carrying amount equals the lower of acquisition or production cost or adjusted net
realisable value. For example, this would be the case if the real estate inventory which is recognised at
net realisable value due to a decline in its selling price would remain in the portfolio and in subsequent
periods its selling price would rise again.
Taxes
Actual tax assets and liabilities for the past period are measured as the amount expected to be
recovered from or paid to the taxation authorities. The amounts are calculated on the basis of the tax
rate and tax laws applicable on the balance sheet date.
As a German real estate investment trust, the acquired Fair Value REIT-AG is principally exempt from
taxes. Generally, taxes will not be applied at the Fair Value REIT-AG level as long as it retains the status
of an exempt REIT. Dividends are taxable at the shareholder level.
Deferred tax assets and liabilities
Deferred taxes are recognised using the liability method for temporary differences between the
carrying amount of an asset or liability in the consolidated balance sheet and its tax valuation as at
the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences
with the exception of deferred tax liabilities arising from taxable temporary differences connected
with interests in subsidiaries, associated companies, and joint ventures, if the timing of the reversal of
the temporary differences can be controlled, and it is likely that the temporary differences will not be
reversed in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences as yet unutilised tax
loss carryforwards and unutilised tax credits to the extent that it is likely that taxable income will be
available against which the deductible temporary differences, unutilised tax loss carryforwards, and
unutilised tax credits can be offset, with the exception of:
■
Deferred tax assets relating to deductible temporary differences arising from the initial
recognition of an asset or liability in a transaction that is not a business combination, and
which, at the time of the transaction, affects neither the profit/loss for the period under
commercial law, nor the taxable profit/loss.
■
Deferred tax assets arising from taxable temporary differences connected with interests
in subsidiaries, associated companies, and joint ventures, if it is likely that the temporary
differences will not be reversed in the foreseeable future, and that there will be insufficient
taxable income available against which the temporary differences can be used.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced insofar
as it is no longer likely that sufficient taxable income will be available against which at least part of the
deferred tax asset can be offset. Unrecognised deferred tax assets are reviewed at each balance sheet
date, and recognised insofar as it has become likely that future taxable income will allow the deferred
tax assets to be realised.
Deferred tax assets for tax loss carryforwards are capitalised only when it is likely that tax loss
carryforwards will be offset by earnings achieved within the foreseeable future. According to IAS 12.36,
deferred tax assets on tax loss carryforwards on the level of the tax entity were only capitalised in the
DEMIRE Group to the extent that deferred tax liabilities were recognised.
Deferred tax assets and liabilities are measured applying the tax rates expected to be valid in the
period in which the asset is realised or the liability is satisfied or expected. The amounts are calculated
on the basis of the tax rates (and tax laws) applicable on the balance sheet date. The subsidiaries’
deferred tax assets and liabilities are calculated using the tax rates of the respective country.
Deferred tax assets and liabilities are offset against one another according to IAS 12.71 if the Group has
an enforceable right to offset tax assets against tax liabilities, and these assets and liabilities relate to
income taxes levied by the same taxation authority against the same taxable entity or against different
taxable entities that intend to realise the assets and fulfil the liabilities at the same time (IAS 12.74).
Deferred taxes relating to items that are recognised in other comprehensive income are not recognised
through profit or loss but instead in the statement of comprehensive income.
DEMIRE recognised deferred taxes for temporary differences and so-called “inside basis differences” at
Fair Value REIT by applying the company-specific tax rate as at the reporting date. Since Fair Value REITAG is generally exempt from taxes, no taxes are incurred at the level of Fair Value REIT as long as its
status as a tax-exempt REIT (Real Estate Investment Trust) is maintained. In addition to the “inside basis
differences”, “outside basis differences” were also recognised for Fair Value REIT-AG according to the
“tax transparent entity” approach. This approach assumes a deemed disposal of all properties directly
held by Fair Value REIT-AG and indirectly held through trusts. For further details, please see Note B.1.
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Value-added tax
Revenues, expenses, and asset are recognised after deducting the value-added tax with the exception
of the following instances:
■
If the value-added tax incurred on the purchase of assets or services cannot be recovered from
the taxation authorities, the value-added tax is recognised as part of the asset’s acquisition or
production cost, or as part of the expense item.
■
Receivables and liabilities are recognised with the value-added tax included.
The amount of value-added tax recovered from, or paid to, the taxation authority is recognised in the
consolidated balance sheet as receivables or liabilities, respectively.
Cash and cash equivalents include cash and deposits recognised at their nominal amount. Cash and
cash equivalents denominated in foreign currencies are translated at the exchange rate prevailing on
the reporting date.
Non-current assets held for sale
Investment properties are classified as non-current assets held for sale if a large portion of the carrying
amount can be realised by a sale and a sale is highly probable. These investments are recognised at the
lower of their carrying amounts and fair values less selling costs. The disposal costs are not recognised
at their present value assuming that the disposal will take place within one year. Impairments from
subsequent measurements will be recognised in profit or loss. A subsequent rise in the fair value will
be recognised as a gain to the maximum extent of the previous impairment.
Following the disposals in the reporting year, the provision for discontinued operations under IFRS 5
were applied. Therefore, all income and expenses, including the disposal gain, attributable to the
discontinued operations, were reported under the line item “profit/loss from the sale of real estate
companies” in the consolidated statement of income.
Trade payable and other liabilities
Liabilities are measured at amortised cost after their initial recognition.
Financial debt
Financial debt is recognised upon initial recognition at fair value less directly attributable transaction
costs and discounts. The fair value of the financial debt as at the grant date corresponds to the present
value of future payment obligations on the basis of maturities and a risk congruent market interest
rate. Financial debt is subsequently measured at amortised cost using the effective interest method.
The effective interest rate is determined on the date the financial debt is initially recognised. A change
in conditions concerning the amount or timing of interest and repayments lead to a recalculation
of the financial debt’s carrying amount at the present value and based on the originally estimated
effective interest rate. Any differences to the previously existing carrying amount of financial debt are
recognised through profit or loss.
Convertible bonds (“CB”) are generally embedded financial instruments that are to be divided for
accounting purposes into a financial debt and a conversion right. Depending on the terms of the
convertible bond, the conversion right can be of an equity or debt nature. If the conversion right is
to be classified as debt, as in the case of DEMIRE’s CB issued in the 2013/2014 fiscal year and Fair
Value REIT’s CB issued in the 2015 fiscal year, the composite financial instrument may also be entirely
accounted for at fair value. Accordingly, the CB issued by the Company was classified as “at fair value
through profit or loss” (IAS 39.11 (c). Thus, all fair value adjustments were recognised in profit or loss.
By resolution of the creditors’ meeting of September 30, 2014, the terms and conditions of DEMIRE’s
convertible bonds have been amended so that the conversion right qualified from this date to be
classified as equity. Due to the material adjustment of the financial debt, the adjustment was treated as
a repayment and new issue. Accordingly, the financial instrument was disposed of at fair value (partly
through profit or loss), and the CB was newly recognised as at September 30, 2014, based on a market
standard interest rate. The equity portion was directly recognised in equity. The financial debt is now
carried under the line item “other liability” through profit or loss by using the effective interest method.
Pension provisions
In measuring provisions for pension obligations, the obligations for company pension schemes are
calculated using the projected unit credit method in accordance with IAS 19. This method not only
takes into account known pensions and vested benefits as at the balance sheet date but also expected
future increases in salaries and pensions. An actuarial valuation is performed at each reporting date.
The amount recognised represents the present value of the defined benefit obligation (DBO) offset
with the fair value of plan assets.
Actuarial gains and losses are fully accounted for in the period they occurred and recognised as a
component of other comprehensive income outside the consolidated statement of income. Also in
subsequent periods, actuarial gains and losses are no longer recognised through profit or loss. The
service cost is recognised in staff costs. An increase in the present value of a defined benefit obligation
that is attributable to the services rendered in the reporting period is considered a service cost. Interest
expenses on pension obligations are reported in the financial result. An increase in the present value
of a defined benefit obligation is considered an interest expense.
A reinsurance policy was concluded for pension commitments and is classified as a plan asset. If the
value of the reinsurance policy exceeds the corresponding amount of obligations, the net amount that
results is recorded as an asset under other assets (non-current).
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140
Provisions
Provisions are recognised during the fiscal year for obligations to third parties for which it is likely that
there will be an outflow of resources in future periods. Provisions for obligations that will likely not
result in a burden on assets in the subsequent year are recognised at the present value of the expected
outflow of assets. The measurement of provisions is reviewed at each balance sheet date.
The interests in net assets of non-controlling shareholders are recognised and reported separately
from the parent company shareholders’ interests in the Group’s equity. The interests in net assets of
non-controlling shareholders consist of the amount of the interests of non-controlling shareholders as
at the balance sheet date of the previous year, and the interests of non-controlling shareholders in the
changes in equity in the fiscal year.
Interests of minority shareholders
Additionally, there are minority shareholders in the Fair Value REIT subgroup (minority interests),
relating to limited partners of predominantly natural persons in real estate funds in the legal form of a
GmbH & Co. KG. These minority shareholders have the right to terminate their shareholding. Therefore,
the interests of these shareholders in the subsidiaries’ share capital are considered under IAS 32 as
potential compensation claims and recognised in the consolidated balance sheet as liabilities. Upon
initial measurement, these interests are recognised at fair value, which corresponds to the interest
of the minority shareholders in the net assets of the respective company. The reported liability is,
therefore, equivalent to the notional interest of the minority shareholders in the net assets of the
respective subsidiary recognised at their carrying amount in Fair Value REIT subgroup’s consolidated
balance sheet.
Share-based payments
In fiscal year 2015, share-based payments in the form of subscription rights (stock options) were issued
to DEMIRE’s Executive Board and a selected group of individuals within the DEMIRE Group. The stock
option programme is, in principle, an option plan whose obligations are met with equity instruments
(equity-settled share option plan). The option plan provides that the obligations of the stock option
programme can only be met with DEMIRE shares. The accounting treatment of share-price based
payments is carried out in accordance with IFRS 2 “Share-based Payment”.
The expenses incurred from the issue of stock options are measured at the fair value of the stock
options granted as at the grant date. The fair value was determined using generally accepted option
pricing models. The expenses from the issue of stock options are recognised over the period in
which the performance conditions are met. At the same time, equity (capital reserves) is increased
by a corresponding amount. This “vesting period” ends at the time the person concerned from the
group of beneficiaries is irrevocably entitled. The cumulative expenses from the granting of equity
instruments recognised at each reporting date reflect the lapsed portion of the vesting period and the
best estimation of the number of equity instruments that will ultimately become exercisable at the
end of the vesting period. The amount recognised in the consolidated statement of income reflects the
development of cumulative expenses recognised at the beginning and the end of the reporting period.
The dilutive effect of outstanding stock options is reflected in the calculation of earnings per share as
additional dilution, provided the issue of options and their underlying conditions result in a dilution for
existing shareholders.
Leases
a) Determining whether an agreement contains a lease
Whether an agreement constitutes a lease or contains a lease, is determined on the basis of the
economic contents of the agreement at the time of conclusion. An agreement constitutes a lease or
contains a lease if the satisfaction of the agreement depends on the utilisation of a particular asset and
the agreement transfers a right to utilise the asset.
A renewed assessment after the start of a lease as to whether an agreement contains a lease is
performed only when one of the following conditions has been satisfied:
■The contractual terms are changed to the extent that the amendment relates not only to a
renewal or extension of the agreement.
■
A renewal option is exercised or an extension is granted, unless the renewal or extension
terms were originally taken into consideration in the lease’s duration.
■
A change occurs in the determination as to whether satisfaction depends on the specific asset.
■The asset undergoes a significant change.
b) The Group as lessor
Leases, through which not all of the opportunities and risks connected with ownership are essentially
transferred by the Group to the lessee, are classified as operating leases. Initial direct costs incurred in
negotiating and entering into an operating lease are added to the carrying amount of the leased asset
and recognised as an expense over the lease term in line with the rental income. Contingent rental
payments are recognised as income in the period in which they are generated.
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142
c) The Group as lessee
Lease payments for operating leases are expensed through the statement of income on a straight-line
basis over the term of the lease agreement.
Income recognition
Revenues consist of rental income (net rents and ancillary rental costs), income from the sale of real
estate companies and income from the disposal of real estate. Rental income is recognised monthly
over the term of the lease stated in the rental agreement and recorded in the statement of income
as rental income. Revenues are recognised on an accrual basis in accordance with the terms of the
underlying contract and when it is likely that the Company will receive the economic benefit from the
transaction. However, when there is doubt concerning the collectability of an amount that has already
been recognised as revenue, the uncollectible or doubtful amount is recognised as an expense and not
deducted from revenue.
When real estate companies and real estate is sold, income is recognised when
■
the opportunities and risks connected with the ownership (ownership rights, benefits and
obligations) have been transferred to the acquirer;
■
the Group retains neither rights of disposition nor effective control over the object of sale;
■
the amount of revenue and the costs arising in connection with the sale can be determined
reliably;
■
it is sufficiently likely that the Group will receive an economic benefit from the sale; and
■
expenses incurred, or to be incurred, in connection with the sale can be determined reliably.
Earnings per share
Basic earnings per share is computed by dividing the net profit/loss for the period attributable to the
parent company shareholders by the weighted average number of shares outstanding during the year.
Diluted earnings per share is calculated by adjusting net profit/loss for the period and the number of
shares outstanding based on the assumption that convertible instruments are converted and warrants
in connection with share-based payments are exercised.
» Accounting policies | Notes to the consolidated statement of income
D. Notes to the consolidated statement of income
1. Profit/loss from the rental of real estate
The Group’s profit/loss from the rental of real estate of EURk 23,680 (abbreviated fiscal year:
EURk 2,290) consists of the following:
EURk
Net rents
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
33,320
3,375
Income from ancillary rental costs
10,024
374
Rental income
43,344
3,749
-12,648
-1,296
Allocable operating expenses to generate rental income
Non-allocable operating expenses to generate rental income
-7,016
-163
Operating expenses to generate rental income
19,664
1,459
23,680
2,290
Income in the 2015 fiscal year resulted primarily from the rental of commercial real estate and is
generally free of seasonal influences. Income from ancillary rental costs is allocable ancillary costs
that were passed on to tenants. The significant rise in rental income to EURk 43,344 resulted mainly
from income from individual properties and real estate portfolios acquired in the second half of
2014 and in the reporting year. The income from rentals at Hanse- and Glockenhofcenter have been
included for eleven months of the reporting year, rentals at the Gutenberg Galerie for seven months,
rentals at Logistikpark Leipzig for six months and those from the T6 property portfolio for two
months of the reporting year.
Ancillary rental costs were recognised as operating expenses to generate rental income and amounted
to EURk 19,664 in the reporting year (previous year: EURk 1,459). Operating expenses of EURk 12,648
(abbreviated fiscal year: EURk 1,296) are generally allocable and can be passed on to tenants. Of
this amount, a total of EURk 2,264 (abbreviated fiscal year: EURk 220) could not be passed on due to
vacancies. Operating expenses of EURk 7,016 (abbreviated fiscal year: EURk 163) are not allocable.
Of these, EURk 1,254 concern staff related expenses of DEMIRE Immobilienmanagement GmbH that
were included for the first time in the reporting year due to the entity’s first time consolidation.
2. Profit/loss from the sale of real estate companies
In the reporting year, the Group generated a profit from the sale of real estate companies of EURk 285
(abbreviated fiscal year: EURk 69).
Disposals during the reporting period mainly concern the legacy portfolio, which includes the
investments in Eastern Europe and the Black Sea Region. The divestments concern Kappatrade Ltd.
(Ukraine), Polartrade Ltd. (Ukraine), OOO Sadko Holding (Russia), OOO New Sadko Holding (Russia),
MAGNAT Real Estate Project Sadko B.V. (the Netherlands) and MAGNAT Real Estate Project New Sadko
B.V. (the Netherlands). There was a negative effect of EURk 301 from the derecognition of currency
translation reserves from the disposal of these companies. In addition, the 2014 purchase of Munich
ASSET Vermögensverwaltung GmbH was reversed as at September 2015, which resulted in a positive
effect on earnings. In total, revenue from the sale of real estate companies of EURk 1,792 were
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144
offset by the net assets disposed of EURk 1,206 and expenses of EURk 301 from the derecognition
of currency translation reserves, leading to a positive result from the sale of real estate companies
of EURk 285.
In the abbreviated 2014 fiscal year, the Group sold Hekuba S.A.R.L. for EURk 3,700, generating a gain
of EURk 167. In addition, R-Quadrat Ukraine Gamma Ltd. and its 50 % stake in RQ Gamma LLC were
sold with a loss of EURk 112 and MAGNAT Asset Management Ukraine Ltd. was sold with a profit of
EURk 14.
3. Profit/loss from the sale of real estate
In the reporting year, the Group generated a profit from the sale of real estate in the amount of
EURk 458 (abbreviated fiscal year: EURk 0).
During the reporting period, the real estate in Parchim (reported as real estate inventory until its sale)
and the Bielefeld property were sold. Proceeds from the sale of the property in Parchim amounted
to EURk 650 and the commercial property in Bielefeld brought proceeds of EURk 1,650. The sales
proceeds were offset by expenses relating to real estate sales totalling EURk 1,842.
4. Profit/loss from investments accounted for using the equity methodn
The profit/loss from investments accounted for using the equity method improved to EURk -500
compared to the abbreviated 2014 fiscal year.
The profits from investments accounted for using the equity method rose year-on-year by EURk 1,662
to EURk 1,861(abbreviated fiscal year: EURk 199) and consisted of income of EURk 1,459 relating to
the revaluation of the SQUADRA property and of EURk 402 from the derecognition of liabilities from
OXELTON. The higher valuation of the SQUADRA property resulted from improved disposal options
for the SQUADRA Group’s office property located in Frankfurt/Main in the course of the planned
change of use to a residential property.
The losses from investments accounted for using the equity method (EURk 3,830, abbreviated fiscal
year: EURk 126) were mainly the result of derecognition of currency translation differences, which
were mainly attributable to the interest in OXELTON.
The line item “unrealised fair value adjustments in equity investments” rose sharply by EURk 2,556
versus the abbreviated 2014 fiscal year to a total of EURk 1,469 and resulted mainly from effects
related to the divestment of OXELTON. An amount of EURk 1,232 was attributed to the derecognition
of loans to OXELTON and EURk 237 to the reclassification of the interests in OXELTON under IFRS 5
in the reporting year.
DEMIRE’s share in the transferred profit or loss of investments accounted for using the equity method
is listed under E.1.4.
At R-QUADRAT Polska Alpha Sp. z o.o., which is an investment accounted for using the equity method,
proportionate accumulated losses of EURk 4,828 (abbreviated fiscal year: EURk 4,057) were not
recognised; of these, EURk 386 occurred in the previous year (abbreviated fiscal year: EURk 908).
In addition, the proportionate losses of EURk 7 (abbreviated fiscal year: EURk 4) of Irao MAGNAT
» Notes to the consolidated statement of income
Gudiashvili LLC were not recognised. At this company, the share of losses exceeded the value of the
investment and, therefore, no further losses were recognised.
5. Profit/loss from fair value adjustments in investment properties
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
21,478
68,278
Unrealised gains from fair value measurement
Unrealised losses from fair value measurement
-3,007
-4,670
Total
18,471
63,608
The profit/loss from fair value adjustments in investment properties of EURk 18,471 (abbreviated fiscal
year: EURk 63,608) mainly concerned properties located in Germany of foreign and domestic direct and
indirect subsidiaries. The greatest value appreciation of EURk 6,647 concerns the Logistikpark Leipzig
acquired at the end of June 2015. Other significant gains resulted from the fair value adjustment of the
properties held by Sihlegg Investments Holding GmbH (EURk 4,735), GO Bremen ApS (EURk 2,279), TGA
Immobilien Erwerb 1 GmbH (EURk 1,275) and GO Leonberg ApS (EURk 1,262).
The fair value of these investment properties is based on external expert opinions. The favourable yield
curves in combination with more intense competition among foreign investors were the key reasons
for the significant increase in valuation factors used to determine the fair value of real estate in the
reporting period.
We refer to Note E.1.3.
6. Unrealised fair value adjustments in real estate inventory
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
0
407
Losses from unrealised fair value adjustments in real estate inventory
0
-100
Total
0
307
Profits from unrealised fair value adjustments in real estate inventory
Profits and losses from unrealised fair value adjustments in real estate inventory include effects
primarily arising because the valuation is based on fair value estimates. There were no changes in
the fair values of the remaining three real estate inventory properties during the reporting year.
The profit in the abbreviated 2014 fiscal year of EURk 407 was attributable to write-ups made to
amortised cost of properties held by 1. MAGNAT Immobiliengesellschaft mbH. We refer to Note E.2.1.
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146
7. Impairment of receivables
Impairment of receivables consists of the following:
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
1,561
342
1,285
54
0
297
2,846
693
Total
Of the impairments made on loans to investments accounted for using the equity method, an
amount of EURk 1,088 relates to OXELTON and EURk 473 to R-Quadrat Polska Alpha Sp. z .o.o. In the
abbreviated 2014 fiscal year, impairments related exclusively to R-Quadrat Polska Alpha Sp. z .o.o.
(EURk 342).
Impairments made to trade accounts receivable and other receivables mainly resulted from
impairments made to purchase price receivables of EURk 284 due to the divestment of companies
contained in the legacy portfolio and rent receivables of EURk 241, which resulted mainly from
companies acquired in the abbreviated 2014 fiscal year.
8. Profits originating from a purchase below market value
Profits originating from a purchase below market value of EURk 33,217 resulted from the acquisition
of Germavest Real Estate S.à.r.l. (T6 portfolio). Because the offsetting of the acquisition costs plus
the interests of non-controlling shareholders against the acquired entity’s net assets resulted in a
negative goodwill, the carrying amounts of the assets and liabilities acquired and the acquisition
cost determined were initially subjected to another critical review. The negative goodwill derived of
EURk 33,217 was recognised immediately through profit or loss in the consolidated income statement
as a non-recurring effect. This amount originates mainly from the fair value in excess of the purchase
price for investment properties recognised at Germavest Real Estate S.à.r.l. For further information,
please see Note B.
9. Other operating income
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
Derecognition of liabilities
788
46
Reversal of impairment losses on receivables
343
19
Income from the disposal of property, plant and equipment
181
0
Gains from foreign currency differences
160
5
Benefits in kind
56
20
Income from the reversal of provisions
38
88
Income from allocated expenses
23
1
Compensation for damages
Others
Total
11
0
972
250
2.572
429
Income from prior periods consists mainly of the derecognition of liabilities in the context of the
reassessment of risk provisions at the balance sheet date, the release of provisions and the reversal
of impairment losses on receivables.
10. General and administrative expenses
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
Legal and consulting fees
4,682
1,356
Accounting and audit costs
3,490
1,303
Staff costs
2,258
578
Advertising and travel expenses
378
158
Supervisory Board compensation
270
63
Expenses for asset management
17
52
Others
Total
237
138
11,332
3,648
The EURk 3,326 increase in legal and consulting fees resulted mainly from non-recurring expenses in
connection with the preparation of stock market prospectuses relating to capital market activities to
acquire real estate companies. The EURk 2,187 increase in accounting and auditing costs also resulted
predominantly from audit and assurance services provided in connection with these activities.
The total sum of staff costs related to staff employed by the ultimate parent company is included in
general and administrative expenses. The increase in staff costs resulted from the higher number of
employees at the parent company due to the Company’s business expansion and from the recognition
of expenses for stock-based payments in the amount of EURk 434.
By resolution of the Annual General Meeting on August 28, 2015, the total remuneration of the
Supervisory Board for the reporting period increased to EURk 270 (abbreviated fiscal year: EURk 63).
147
148
11. Other operating expenses
EURk
Non-deductible input taxes
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
1,139
662
Transaction costs for the acquisition of Germavest Real Estate S.à.r.l.
793
0
Expenses for Annual General Meeting and investor relations
767
42
Third-party services
679
685
Fees and incidental costs of monetary transactions
526
178
Losses from foreign currency differences
154
194
Property management
144
176
Insurance fees
78
51
Occupancy costs
77
60
Differences from the intercompany consolidation of liabilities, expenses and income
74
95
Legal and consulting fees
58
78
Others
Total
776
693
5,265
2,914
The increase in non-deductible input taxes resulting from higher legal and consulting fees
were primarily related to the parent company, which is not entitled to a full input tax deduction.
Transaction costs of EURk 793 resulted from the acquisition of Germavest Real Estate S.à.r.l., which
was accounted for as a business combination according to IFRS 3.
12. Financial result
EURk
Financial income
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
2,145
6,955
Financial expenses
-27,873
-9,893
Financial result
-25,728
-2,938
Financial income of EURk 2,145 resulted mainly from positive valuation effects from the fair
measurement of the call option of the 2014/2019 corporate bond.
The derecognition of the receivable totalling EURk 3,060 against OXELTON, which was considered
unrecoverable following the renegotiation of the mezzanine loan, had a negative impact of EURk 1,972
on the financial result.
As a result of a change in DEMIRE’s convertible bond’s terms and conditions on September 30, 2014,
and the corresponding accounting of this change as a repayment and new issue, the difference
between the bond’s fair value and its nominal value was recognised through profit or loss and led
to a profit in the abbreviated 2014 fiscal year of EURk 6,000. At that time, an amount of EURk 490
was recognised directly in equity as an equity component upon the initial recognition of the new
debt instrument. This was offset by the development of the bond’s fair value during the period from
April 1, 2014 to September 30, 2014, resulting in financial expenses of EURk 6,519.
The higher financial expenses resulted from loans assumed for real estate acquired at the end of the
abbreviated 2014 fiscal year and in the current fiscal year (see Note E. 5.3 and E. 6.4).
Detailed information on net gains and losses from loans and receivables and financial liabilities is
contained in Note l.1.
13. Income taxes
EURk
Current income taxes
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
755
348
Deferred income taxes
3,384
9,441
Total income taxes (– = income / + = expense)
4,139
9,789
Current tax expenses of EURk 755 (previous year: EURk 348) include corporate and trade taxes.
Deferred taxes of EURk 3,384 (abbreviated 2014 fiscal year: EURk 9,441) consisted of deferred
tax income of EURk 2,758 (abbreviated 2014 fiscal year: EURk 682) and deferred tax expenses of
EURk 6,142 (abbreviated 2014 fiscal year: EURk 10,123). Deferred tax expenses resulted mainly from
temporary differences arising from the valuation of investment properties according to IAS 40.
Current income taxes are distributed among domestic and foreign companies as follows:
EURk
Germany
Foreign countries
Total
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
754
314
1
34
755
348
As at the balance sheet date, unutilised tax loss carryforwards from consolidated companies
totalled EURk 47,731 (previous year: EURk 22,752). This amount includes EURk 47,364 (previous year:
EURk 22,577) of perpetual tax loss carryforwards. Of the remaining tax loss carryforwards, EURk 163
will expire in the coming year. Tax loss carryforwards of EURk 28 will expire in 2017, EURk 21 in 2018,
EURk 137 in 2019 and EURk 18 in 2020. Deferred tax assets for these tax loss carryforwards are
capitalised only when it is likely that tax loss carryforwards will be offset by earnings achieved in the
foreseeable future. In the DEMIRE Group, deferred tax assets on tax loss carryforwards at the level
of the same tax entity were capitalised only to the extent that deferred tax liabilities were recognised.
149
150
Distributions to shareholders from DEMIRE AG result in neither corporate nor trade taxes for the
Company. Nevertheless, the Company is generally liable for German capital gains tax plus the
solidarity surcharge (withholding tax), which the Company is required to withhold from the resolved
distribution and transfer to the relevant German tax office.
Distributions generally require shareholders to pay income or corporate taxes, unless the distributions
are not subject to taxation due to the shareholders’ tax status or other circumstances. Withholding
taxes withheld and transferred by the Company can generally be offset by the shareholder’s income
and corporate tax liability and is reimbursable, dependent upon of the shareholders’ tax status.
Tax reconciliation statement
The tax reconciliation statement between the theoretical and actual tax expense is presented on the
basis of the Group tax rate of 31.93 % (previous year: 31.93 %). The Group tax rate of 31.93 % includes
a 15 % corporate tax rate valid from January 1, 2008, a 5.5 % solidarity surcharge and a 16.1 %
trade tax (municipal rate for Frankfurt/Main: 460 %; trade tax rate 3.5 %). The calculation of the
deferred taxes of domestic real estate companies is based on a tax rate of 15.83 %. These companies
generate income exclusively from managing their own real estate. Only the corporate tax rate and
the solidarity surcharge apply to these companies because of the option to deduct the profit from
the management of own real estate from the profit under trade tax law. The calculation of deferred
taxes for foreign companies acquired during the reporting period was also based on a tax rate of
15.83 % because these companies are not subject to trade tax.
EURk
01/01/2015 –
31/12/2015
01/01/2014 –
31/12/2014
33,012
55,496
31.93 %
31.93 %
Expected income taxes
10,541
17,720
Tax rate differences
-3,626
-11,197
2,869
502
Group tax rate
Tax effects arising from non-deductible operating expenses
Tax effects of tax-free income
-12,166
-123
6,324
4.066
Tax effects arising from the recognition of deferred tax assets for tax loss
carryforwards which were not capitalised in prior periods
-53
-1.051
Others
250
-128
4.139
9,789
Tax effects arising from non-utilised losses and non-recognised temporary
differences for which no deferred tax assets were capitalised
Actual income taxes
Tax-free income resulted primarily from the profit from to the purchase of Germavest Real Estate
S.à.r.l. below market value and from profits of companies accounted for using the equity method
and the positive result from the sales of real estate companies. In the statement of income, income
from companies accounted for using the equity method is included in profit/loss from investments
accounted for using the equity method and in profit/loss from the sale of real estate companies. The
tax effect arising from non-deductible operating expenses mainly resulted from the interest barrier
rule under corporate tax law.
According to IAS 12 (Income Taxes), deferred tax liabilities are also to be recognised on the difference
between the proportionate share in equity of a subsidiary in the consolidated statement of income
and the carrying amount of the subsidiary in the parent company’s balance sheet under tax law
(outside basis differences), if realisation is to be expected. These differences mainly resulted from
retained earnings in domestic and foreign subsidiaries.
Recognising deferred taxes on outside basis differences as temporary differences means that future
tax effects should be reported at the time profits originate, even if a distribution of profits to the
parent company and the corresponding taxation of the parent company will occur only in future
periods. The Company can determine the timing of distributions and the retention of earnings from
subsidiaries. Except for the mandatory distributions from Fair Value REIT-AG, dividend distributions
from subsidiaries are neither planned nor foreseeable. Therefore, the recognition of deferred taxes
for outside basis differences was waived with the exception of the deferred taxes recognised for Fair
Value REIT. The recognition of deferred taxes for outside basis differences at the level of Fair Value
REIT amounted to EURk 4,739 as at December 31, 2015 (previous year: EURk 0).
For additional information relating to deferred tax assets and liabilities, we refer to Note E.5.1.
14. Net profit/loss for the period attributable to non-controlling shareholders
Net profit/loss for the period attributable to non-controlling shareholders amounted to EURk 756 in
the reporting year (abbreviated 2014 fiscal year: EURk 2,405).
15. Earnings per share
Basic earnings per share is computed by dividing the net profit/loss for the period attributable to
the parent company shareholders by the weighted average number of shares outstanding during the
year.
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
Net profit/loss (EURk)
28,873
45,707
Net profit/loss attributable to parent company shareholders
28,117
43,302
829
495
28,946
43,797
Number of shares outstanding as at the balance sheet date
49,292
14,306
Weighted average number of shares outstanding
25,889
14,306
Impact of conversion of convertible bonds
13,662
10,889
1,000
0
40,551
25,195
Basic earnings per share (EUR)
1.09
3.03
Diluted earnings per share (EUR)
0.71
1.74
Interest expenses from convertible bonds
Net profit/loss attributable to parent company shareholders (diluted)
Number of shares
Weighted average number of shares (diluted)
Earnings per share (EUR)
151
152
As at December 31, 2015, the company had potential ordinary shares outstanding from the 2013/18
convertible bond, which can be exchanged by the holders of the convertible bonds in exchange for
10,661,700 shares (previous year: 10,885,500 shares).
Diluted earnings per share is calculated by adjusting net profit/loss for the period and the number
of shares outstanding based on the assumption that convertible instruments are converted and
warrants in connection with share-based payments are exercised.
16. Staff costs
EURk
Salaries
Statutory social expenses
Total
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
2,231
545
281
33
2,512
578
Staff costs of EURk 2,258 are generally included in general and administrative expenses and
relates mainly to DEMIRE AG (EURk 1,617), Logistikpark Leipzig GmbH (EURk 174) and Magnat Asset
Management GmbH (EURk 205). DEMIRE Immobilien Management GmbH’s staff costs of EURk 254
are not included in general and administrative expenses but instead in expenses to generate rental
income. Around half of the statutory social expenses relate to the statutory pension scheme.
The sharp rise over the previous year resulted from the increased number of staff in the course of
expanding the Company’s business activities.
DEMIRE AG’s staff costs include expenses of EURk 434 for stock-based compensation.
17. Scheduled depreciation and amortisation
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
1
0
of property, plant and equipment
21
3
Total
22
3
of other intangible assets
Scheduled depreciation and amortisation is included in other operating expenses.
» Notes to the consolidated statement of income | Notes to the consolidated balance sheet
E. Notes to the consolidated balance sheet
1. Non-current assets
1.1. Intangible assets
1.1.1 Goodwill
EURk
2015
2014
Acquisition cost as at the beginning of the fiscal year
463
1,029
Cumulative impairment as at the beginning of the fiscal year
463
1,029
0
0
Carrying amounts as at the beginning of the fiscal year
Additions
6,783
0
Disposals
0
566
7,246
463
Acquisition cost as at the end of the fiscal year
Cumulative impairment as at the end of the fiscal year
463
463
Carrying amounts as at the end of the fiscal year
6,783
0
EURk
2015
2014
0
0
Impairment during the fiscal year
Upon consolidation, net deferred tax liabilities of EURk 4,739 were recognised for the deemed
disposal of the properties held by Fair Value REIT-AG (analogous to the “tax transparent entities”)
using a tax rate of 31.93 %. This resulted in the recognition in the consolidated financial statements
of DEMIRE AG of goodwill totalling EURk 6,783 from the acquisition of Fair Value REIT. Deferred tax
liabilities increased the positive difference or goodwill of EURk 2,044 by an amount of EURk 4,739.
Goodwill of EURk 6,783 resulting from the first-time consolidation of Fair Value REIT-AG as at the
balance sheet date has been allocated to Fair Value REIT-AG because Fair Value REIT-AG will be the
main beneficiary of the synergy effects in the areas of property management and administration.
Because the date of the purchase price allocation corresponds to DEMIRE’s balance sheet date and the
amounts determined during the purchase price allocation were once again reviewed, an impairment
test of goodwill was not conducted as at the balance sheet date. The determined recoverable amount
would not have been lower than the carrying amount of goodwill.
Goodwill also includes the goodwill form the subsidiary MAGNAT Investment I B.V. determined in the
context of the capital consolidation, which has been fully impaired in previous years.
153
154
1.1.2 Other intangible assets
A useful life of three to five years is applied to other intangible assets. This primarily includes
computer software. Amortisation is reported in the statement of income in the line item “other
operating expenses” (EURk 1; previous year: EURk 0).
EURk
2015
2014
49
50
Cumulative amortisation as at the beginning of the fiscal year
49
49
0
1
Additions
3
0
175
0
Disposals
0
1
Amortisation
1
0
227
49
50
49
177
0
Cumulative amortisation as at the end of the fiscal year
Additions from business combinations in the amount of EURk 175 relate to the Internet domain “Fair
Value REIT-AG” (EURk 25) and contractual claims from partner companies (EURk 150) of the Fair Value
REIT subgroup.
1.2 Property, plant and equipment
Office and operating equipment
Property, plant and equipment include office and operating equipment. A useful life of 3 to 15 years
is applied for their depreciation. Depreciation amounts are reported in the statement of income in
line item “other operating expenses” (EURk 22; previous year: EURk 3).
EURk
2015
2014
156
336
Cumulative depreciation as at the beginning of the fiscal year
129
126
27
210
Additions
62
30
26
0
Disposals
16
210
Depreciation
21
3
228
156
Cumulative amortisation as at the end of the fiscal year
134
129
94
27
» Notes to the consolidated balance sheet
Advance payments
EURk
Cumulative depreciation as at the beginning of the fiscal year
2015
2014
11,303
0
0
0
11,303
0
Additions
11,191
11,303
Disposals
11,303
0
0
0
11,191
11,303
Depreciation
Cumulative depreciation as at the end of the fiscal year
0
0
11,191
11,303
Advance payments as at December 31, 2015, relate mainly to the real estate property KurfürstenGalerie
in Kassel, for which the transfer of benefits and obligations took place on January 1, 2016. Last year,
advance payments related to the property in Leverkusen, for which the transfer of benefits and
obligations was carried out as at January 1, 2015.
1.3 Investment properties
Investment properties are carried at fair value. Changes in fair values during the fiscal year were as
follows:
EURk
2015
2014
Fair value as at the beginning of the fiscal year
333,070
20,526
Additions resulting from mergers
469,114
0
Additions from the acquisition of real estate
81,624
248,726
Reclassifications from advance payments and real estate inventory
14,065
210
Reclassifications to non-current assets held for sale
-1,255
0
Unrealised gains from fair value measurement included in Item D.5 in the statement
of income
21,478
68,278
Unrealised losses from fair value measurement included in Item D.5 in the statement
of income
-3,007
-4,670
915,089
333,070
Fair value as at December 31 of the fiscal year
Additions to investment properties resulting from mergers originated from the acquisition of the
properties of the Fair Value REIT subgroup as at December 31, 2015 and the acquisition of the
properties of Germavest Real Estate S.à.r.l as at October 31, 2015. Additions from the purchase of
individual properties comprised 59 properties in Germany (abbreviated 2014 fiscal year: 120), which
were acquired by the DEMIRE subgroup during the fiscal year. Of these properties, 38 properties
were attributable to the Fair Value REIT subgroup. The properties are commercial properties which
are rented over the long term. The fair value of the properties newly acquired in the fiscal year
was determined by an independent external expert as at the reporting date. Valuation gains of
155
156
EURk 21,478 (abbreviated fiscal year: EURk 68,278) and valuation losses of EURk 3,007 (previous year:
EURk 4,670) were recognised in the 2015 fiscal year.
The reclassifications to non-current assets held for sale include the Peissen property held by DEMIRE
Objektgesellschaft Worms GmbH in the amount of EURk 630 and the Am Bahnhof 3 property of
Hanse-Center Objektgesellschaft mbH in the amount of EURk 625.
The item reclassifications from property, plant and equipment/real estate inventory in the total
amount of EURk 14,065 concerns advance payments for the Goetheplatz, Leverkusen property
(EURK 11,303), which was transferred in the reporting year, and the properties in Worms and HallePeissen (EURK 2,762), which were reclassified from real estate inventory during the reporting year.
To determine the point in time at which a reclassification between the different hierarchy levels
is considered to have occurred, the Company uses the time of the event or of the change in
circumstances that caused the reclassification. In the period under review, no reclassifications
between hierarchy levels 1, 2, and 3 have been carried out when measuring at fair value. The following
presents information regarding the fair value measurement of the Group’s investment properties as
at December 31, 2015, according to IFRS 13.
EURk
Commercial properties in Germany
Measurement hierarchy
Fair value
Dec. 31, 2015
Quoted prices in
active markets for
identical assets
(Level 1)
Other observable
material input
factors
(Level 2)
Other non-observable material
input factors
(Level 3)
915,089
0
0
915,089
Fair value
Dec. 31, 2015
Quoted prices in
active markets for
identical assets
(Level 1)
Other observable
material input
factors
(Level 2)
Other non-observable material
input factors
(Level 3)
333,070
0
0
333,070
EURk
Commercial properties in Germany
Measurement hierarchy
Information on investment properties held by the DEMIRE subgroup
The following significant contributions to investment properties of the DEMIRE subgroup are
contained in the consolidated statement of income:
EURk
Property management income
2015
2014
43,344
3,749
Property management expenses
19,664
1,459
23,680
2,290
A sensitivity analysis of the significant, non-observable input factors had the following impact on the
fair value of investment properties:
Change in value
EURk
in %
1
Property yield
Market rent1
-0.5 %
+0.5 %
-10 %
+10 %
42,085
-38,300
-49,020
48,770
+6.0
-6.6
-7.6
+7.6
Taking into account rental income, vacancy rates, administration and maintenance costs.
A significant increase in maintenance costs, vacancy rates, and property yields would result in a
decrease in the properties’ fair value assuming unchanged assumptions regarding all other input
factors.
Information on investment properties held by the Fair Value REIT subgroup
The discounted cash flow method is the valuation method used to determine the fair value of real
estate held by the Fair Value REIT subgroup. The number of investment properties held by the
subgroup Fair Value REIT as at December 31, 2015 totalled 38 properties with 34 properties fully
owned, three properties partially owned and one leasehold property. Additionally, two properties,
for which the transfer of ownership, benefits and obligations did not take place in 2015, have been
reported under non-current assets held for sale.
The properties’ fair values were determined on an individual basis using the DCF method by CBRE
GmbH, Frankfurt. The cash flows for a 10-year period were planned in detail. After this period, and
amount of sustainable rental income was applied whose present value was determined on the basis
of property-specific capitalisation rates taking into account estimated costs to sell after 10 years.
The cash flow surplus of the 10-year period and the net present value resulting after this period was
discounted at discount rates to the valuation date, reduced by the amount of estimated incidental
acquisition costs of a potential buyer. The land value was used for the calculation of the property in
Chemnitz.
The following effects on the fair value of investment properties were determined by a sensitivity
analysis of the significant unobservable input parameters:
Change in value
EURk
in %
1
Property yield
Market rent1
-0.5 %
+0.5 %
-10 %
+10 %
13,362
-11,779
-10,660
+10,218
+7 %
-7 %
+7 %
-7 %
Taking into account rental income, vacancy rates, administration and maintenance costs.
1.4. Investments accounted for using the equity method
Interests in investments accounted for using the equity method (EURk 3,136; previous year:
EURk 2,613) include interests in associated companies (EURk 3,020; previous year: EURk 1,615) and
joint ventures (EURk 116; previous year: EURk 998).
157
158
1.4.1. Interests in associated companies
Company
Russian Land AG
Total
Carrying amount
as at
31/12/2015
EURk
Carrying amount
as at
31/12/2014
EURk
3,020
1,592
0
23
3,020
1,615
DEMIRE’s relationship to the associated companies is of an operational nature. The companies’
activities primarily concern real estate management.
The EURk 1,428 increase in the carrying amount of SQUADRA Immobilien GmbH & Co. KGaA
resulted from unrealised fair value changes in the context of the real estate valuation carried out in
the reporting year that positively impacted DEMIRE’s proportionate share in earnings. This higher
valuation resulted from improved disposal options for the SQUADRA Group’s office property located
in Frankfurt/Main in the course of the planned change of use to a residential property.
The reconciliation of the carrying amounts of the interests in associated companies is derived based
on DEMIRE’s interest in the transferred profit or loss according to the annual or interim financial
statements:
Company
Profit/loss in
fiscal year 2015
EURk
Profit/loss in
abbreviated 2014
fiscal year
EURk
-1,428
-126
Total
1,428
-126
The transferred profit of EURk 1,428 from SQUADRA to DEMIRE in the 2015 fiscal year includes
unrealised fair value adjustments of EURk 1,473 relating to the revaluation of a property.
The line item “profits from investments accounted for using the equity method” in the consolidated
income statement in the amount of EURk 1,861 (abbreviated 2014 fiscal year: EURk 199) comprises
income of EURk 1,473 relating to the revaluation of a property at SQUADRA and income of EURk 402
from the derecognition of liabilities from OXELTON.
1.4.2. Interests in joint ventures
Company
Carrying amount
as at 31/12/2015
EURk
Carrying amount
as at 31/12/2014
EURk
0
869
0
0
116
129
Total
0
0
116
998
DEMIRE’s relationship to the joint ventures is of an operational nature. The companies’ activities
primarily concern real estate management.
DEMIRE’s interest in the transferred profit or loss according to the annual or interim financial
statements of the joint ventures and the derecognition of liabilities is as follows:
Company
Income from the
derecognition of
liabilities (2015)
Profit/loss in
fiscal year 2015
Profit/loss in
abbreviated 2014
fiscal year
EURk
EURk
EURk
0
0
0
0
0
0
0
0
0
433
0
199
Total
433
0
199
The interests in OXELTON ENTERPRISES Limited, Limassol, Cyprus, recognised using the equity method,
were sold in December 2015. In the course of this sale, reserves for currency translation differences
of EURk 3,830 attributable to OXELTON were derecognised through profit or loss under IAS 21.48 (see
Note D.4).
In the abbreviated 2014 fiscal year, impairment on the interest of OXELTON ENTERPRISES Limited in
the amount of EURk 1,087 was recognised as well as foreign exchange losses of EURk 1,067 in other
comprehensive income.
The projects of the Irao MAGNAT 28/2 LLC and the R-QUADRAT Polska Alpha Sp. z o.o. joint ventures
are nearly complete. As a result, it is not expected that the DEMIRE Group will be obliged to provide
further funds.
Due to the withdrawal of Irao MAGNAT Gudiashvili LLC from the “Gudiashvili Square” project, this
company is not generating any operating cash flow from which the operating expenses can be paid.
The Group is supplying this joint venture an adequate amount of funds in order to cover the operating
expenses that are incurred. No further loans were granted in the reporting year.
159
160
1.5. Other financial assets
The carrying amounts of other financial assets amounted to EURk 11,045 (previous year: EURk 14) and
mainly contain the non-current portion of the receivable settlement credit in the amount of EURk 9,018
from the subgroup Fair Value REIT.
The receivable settlement credit for the terminated shares in BBV 09 was set at a level of
EUR 10.02 million by an appointed arbitrator on November 30, 2015. The receivable settlement credit
is due on May 31, 2016, however, according to the business plan of BBV 09, It will be paid in three
annual instalments of 10 %, 10 % and 80 %, but at least in instalments of 1 %, 1 % and 98 %, plus
default interest of 4 % per annum payable as of the due date. Accordingly, this results in a non-current
portion in the amount of EURk 9,018 and a current portion of EURk 1,002. The company has issued a
letter of subordination in favour of the financing bank of BBV 09. BBV 09 has committed to surrender
distributions to shareholders of BBV 09 until the claims of former shareholders are met.
By agreement of July 10, 2008, an existing pension commitment of IC Fonds GmbH for the benefit of
Mr. Frank Schaich was assumed by Fair Value REIT-AG. This results in a defined benefit obligation for the
company under IAS 19. A pension insurance policy has been taken out for to cover the commitment,
which is pledged to the beneficiary and therefore, as plan assets, is offset against the present value of
the defined benefit obligation (DBO).
The following pension obligations and plan assets were assumed:
EURk
As at the beginning of the fiscal year
31/12/2015
131
Fair value of plan assets
As at the end of the year
Underfunding (-) / overfunding (+) of pension plan
126
-5
The following actuarial assumptions were made:
in %
31/12/2015
Discount rate
2.0
Expected return on plan assets
2.0
1.6. Loans to investments accounted for using the equity method
Loans to companies accounted for using the equity method of EURk 553 (previous year: EURk 2,857)
concern loans to R-QUADRAT Polska Alpha Sp. z o.o. The decline in loans mainly resulted from the
impairment of the OXELTON loan amounting to EURk 3,060 in the context of the sale of the interest in
OXELTON to the former owner of the mezzanine loan.
1.7. Other loans
The majority of other loans of EURk 384 (previous year: EURk 322) is due at the end of 2021 and
consists of receivables from the partial sale of a property.
2. Current assets
2.1 Real estate inventory
Of the real estate inventory, an amount of EURk 2,298 (previous year: EURk 7,355) concerns developed
and undeveloped properties that are destined for resale. During the reporting period, there were no
write-ups in value and the decline arose from the divestment of real estate investments in Eastern
Europe and the Black Sea Region contained in the legacy portfolio. In the abbreviated 2014 fiscal year
there were reversals of impairment amounting to EURk 407 as a result of the reversal of extraordinary
depreciation on the real estate inventory of 1. MAGNAT Immobiliengesellschaft mbH. A significant
portion of this property was let during the abbreviated fiscal year. Furthermore, minor impairments for
several properties totalling EURk 100 were made in the abbreviated fiscal year.
During the reporting period, as a result of divestments at Kappa Trade Ltd. and Polar Trade Ltd.,
real estate inventory of EURk 2,036 (previous year: EURk 1,173) was disposed of. The corresponding
expenses are included in the line item “net assets from real estate companies sold”.
Also in the reporting period, the Parchim property recognised as real estate inventory was sold at its
remaining carrying amount of EURk 192 and the related expense is included in the item “expenses
relating to real estate sales”.
The Worms and Halle-Peissen properties recognised in the prior year under “real estate inventory” was
reclassified in the reporting period as “investment properties” due to a change of use in accordance
with IAS 40.58.
2.2 Trade accounts receivable and other receivables
EURk
31/12/2015
Gross
Impairment
31/12/2015
Net
31/12/2014
Gross
31/12/2014
Net
Trade accounts receivable against third
parties
8,837
4,347
4,490
3,535
1,143
Receivables from processing value-added
tax
2,056
0
2,056
357
357
Purchase price receivables from legacy
portfolio sales
2,914
284
2,630
1,132
1,132
Purchase price receivables from Erlangen
property
1,355
0
1,355
0
0
Unbilled revenue from ancillary rental cost
1,571
0
1,571
0
0
Receivables from settlement credit BBV 09
1,002
0
1,002
0
0
151
0
151
72
72
Administrator accounts
Overpaid purchase prices
Others
Total
0
0
0
3,672
3,672
1,132
0
1,132
2,964
2,911
19,018
4,631
14,387
11,732
9,287
161
162
All trade accounts receivable are current and predominantly due in less than 3 months. Impairments
of EURk 4,631 (previous year: EURk 2,444) were recognised. Their development is presented in the
following table. None of the receivables are significantly overdue. Expenses for additions to impairment
charges are included in the statement of income under the line item “impairment of receivables”. The
following table illustrates the development of accumulated impairment.
EURk
2015
2014
Accumulated impairment at the start of the fiscal year
2,444
2,513
Impairment in the current year
1,285
54
0
-104
-343
-19
509
0
Realisation of impairment
Reversal of impairment
Acquired impaired from business combinations
Reclassifications
Accumulated impairment at the end of the fiscal year
736
0
4,631
2,444
Reclassifications of EURk 736 in the reporting year mainly resulted from the reclassification of balance
sheet items related to changes in maturities and the corresponding impairments.
If the collection of receivables becomes doubtful, they are then recognised at the lower realisable
value. In addition to the individual allowances required for bad debt, identifiable risks relating to
general credit risk in the form of fixed-sum allowances have also been taken into account.
2.3 Financial receivables and other financial assets
Financial receivables and other financial assets mainly include receivables from redemption of
fractional bonds from the 2014/2019 corporate bond amounting to EURk 14,375, blocked investment
funds for EOGF Land mbH of EURk 3,000, a loan to Taurecon Real Estate Consulting GmbH, Berlin, in
the amount of EURk 2,168 and a loan of EURk 2,074 to Taurecon Beteiligungs GmbH, Berlin, which is a
non-controlling shareholder in some of DEMIRE’s Group companies.
Of the financial receivables and other financial assets, there were no receivables overdue after taking
the respective impairments into account. Impairment charges are included in the item “impairment of
receivables” in the statement of income. The gross amount of financial receivables and other financial
assets is the sum of the current carrying amounts and the accumulated impairments at the end of the
fiscal year.
The following table shows the development of accumulated impairment.
EURk
2015
2014
Accumulated impairment at the start of the fiscal year
3,179
3,325
Impairments in the current year
0
639
Realisation of impairment
0
-785
0
0
-203
0
Reversal of impairment
Currency differences
Reclassifications
-2,385
0
591
3,179
Accumulated impairment at the end of the fiscal year
Reclassifications of EURk 2,385 in the reporting year mainly resulted from the reclassification of balance
sheet items related to changes in maturities and the corresponding impairments.
2.4 Cash and cash equivalents
Cash and cash equivalents of EURk 28,467 (previous year: EURk 4,397) include cash on hand and credit
balances at financial institutions, EURk 16,028 of which concern the subgroup Fair Value REIT.
3. Non-current assets held for sale
The item contains properties held for sale:
Property
EURk
Carrying amount
as at
31/12/2015
Carrying amount
as at
31/12/2014
11,100
0
Tornesch property ("Fair Value REIT-AG ")
650
0
Halle-Peissen property (DEMIRE Worms Objektgesellschaft GmbH)
630
0
Am Bahnhof 3 property (Hanse-Center Objektgesellschaft mbH)
625
0
13,005
0
Radevormwald ("BBV08") property
Total
The Radevormwald (BBV 08) property was sold for a purchase price of EURk 11,100 based on a notarised
purchase agreement dated March 4, 2016. The transfer of benefits and obligations to the buyer for this
property took place on March 31, 2016.
Based on a purchase agreement dated January 29, 2016, the property located in Tornesch at WillyMeyer-Str. 3-5, was sold to a local businessman. The purchase price of EURk 650 is 10 % higher than the
expert appraised market value on December 31, 2015 of EURk 590. The transfer of ownership, benefits
and obligations took place after full payment on March 17, 2016.
On November 17, 2015, a contract was concluded for the sale of the Halle-Peissen property at a price
of EURk 650. The transfer took place in the first quarter of 2016 upon the fulfilment of the contractual
conditions.
At the time of preparing these consolidated financial statements, the property Am Bahnhof 3 had not
yet been sold.
163
164
4. Equity
Subscribed capital
In reference to the explanations in Note A.5., subscribed capital amounted to EURk 49,292 (previous
year: EURk 14,306). Capital reserves contain a EURk 7,425 difference in the subscribed capital of
EURk 49,292 and the sum of the subscribed capital of MAGNAT Asset Management GmbH in an amount
of EURk 160 as the economic parent company following the reverse acquisition and the acquisition
costs for the acquisition of DEMIRE Deutsche Mittelstand Real Estate AG of EURk 21,160. A description
of the other reserves can be found in Note G.1.
The subscribed capital of the legal parent company, DEMIRE Deutsche Mittelstand Real Estate AG,
amounted to EUR 49,292,285.00 (previous year: EUR 14,306,151.00).
The subscribed capital is divided into 49,292,285 no-par value bearer shares with a notional interest of
EUR 1.00. All shares are fully paid-in. There are no restrictions concerning voting rights or the transfer
of shares. Shares endowed with special rights conferring power of control do not exist. The increase in
subscribed capital resulted from conversions of 2013/2018 convertible bonds, a cash capital increase
and the capital increase against contribution in kind related to newly acquired properties or companies.
If there is a capital increase, the profit participation of new shares may deviate from Section 60
para. 2 of the German Stock Corporation Act (AktG).
Shareholders are not entitled to share certificates to the extent this is permitted by law.
Number of shares outstanding:
31/12/2015
31/12/2014
Number of no-par value bearer shares issued
49,292,285
14,306,151
of which fully paid-in
49,292,285
14,306,151
Conversion of 2013/2018 convertible bonds
An increase of 226,800 shares resulted from conversions from the 2013/2018 convertible bond.
The Company’s share capital was conditionally increased following the exercise of conversion rights
from the 2013/2018 convertible bond and the issue of 226,800 new shares from Conditional Capital
I/2013 by up to EUR 6,309,025.00, divided into a maximum of 6,309,025 no-par value bearer shares
with a notional interest of EUR 1.00. The original number of convertible bonds was 11,300,000.
Following the conversion of a further 226,800 bonds in the reporting period, the remaining number of
conversions rights totalled 10,661,700. The conditional capital increase serves to grant sub¬scription
and/or conversion rights to the holders of bonds with warrants and/or convertible bonds to be issued
under the authorisation of the Annual General Meeting of October 23, 2013.
Capital increase against contribution in kind to acquire Hanse-Center Objektgesellschaft mbH and
Glockenhofcenter Objektgesellschaft mbH
Based on the authorisation of the Annual General Meeting of October 15, 2014, the Company’s share
capital was increased from authorised capital against contribution in kind on one occasion in an amount
of EUR 5,633,710 excluding shareholder subscription rights upon its registration in the commercial
register on January 22, 2015.
Alpine Real Estate GmbH was admitted to subscribe to the new shares and made a contribution in
kind to DEMIRE AG consisting of 94.9 % of Alpine’s interest in Hanse-Center Objektgesellschaft mbH,
94.9 % of the interest in Glockenhofcenter Objektgesellschaft mbH and a receivable against HanseCenter Objektgesellschaft mbH. In the context of the capital increase, each new DEMIRE AG share was
assigned a value of EUR 1.75.
Capital increase against contribution in kind to purchase Gutenberg Galerie
Based on the authorisation of the Annual General Meetings of October 15, 2014 and March 6, 2015,
the Company’s share capital was increased against contribution in kind and excluding shareholder
subscription rights in a total amount of EUR 2,182,567.00. Ketom AG, Switzerland, was admitted
to subscribe to the new shares in return for providing a contribution in kind consisting of a 94 %
interest in the project company Sihlegg Investments Holding GmbH, Switzerland and all claims from a
shareholder loan granted to the project company by Ketom AG. A value of EUR 4.028 per DEMIRE AG
share was used to determine the amount of the capital increase and the number of new DEMIRE AG
shares to be issued. The capital increase was recorded in the commercial register on May 27, 2015.
Capital increase against contribution in kind to purchase Logistikpark Leipzig GmbH
On May 13, 2015, with the approval of the Supervisory Board on May 19, 2015, a resolution was made
to increase the Company’s share capital from authorised capital once by EUR 2,541,149.00 against a
mixed contribution in kind and excluding shareholders’ subscription rights. M1 Beteiligungs GmbH,
Berlin, was admitted to subscribe to the new shares in return for a contribution in kind consisting of
a 94 % interest in Logistikpark Leipzig GmbH. A value of EUR 5.84 per DEMIRE AG share was used to
determine the amount of the capital increase and the number of new DEMIRE AG shares to be issued.
The capital increase was recorded in the commercial register on July 1, 2015.
Cash capital increase
The Company’s share capital was increased on July 17, 2015 by EUR 2,474,152 by means of a 10 % cash
capital increase. The 2,474,152 new no-par value ordinary bearer shares (no-par value shares) were
of a private placement. The issue price of the new shares was EUR 4.51 per share. The new shares
are entitled to dividends as of January 1, 2015. The capital increase was recorded in the commercial
register on July 14, 2015.
Capital increase against contribution in kind to purchase Fair Value REIT-AG
On October 14, 2015, the Executive Board of DEMIRE AG made a voluntary public takeover offer to the
shareholders of Fair Value REIT-AG in which they could exchange their shares for newly created shares
of DEMIRE AG. The aim of the acquisition was to create the leading commercial real estate specialist
with a focus on German secondary locations and a common real estate portfolio valued at roughly
EUR 1 billion.
165
166
The share exchange took place at a ratio of two DEMIRE Deutsche Mittelstand Real Estate AG shares for
one Fair Value REIT-AG share. The exchange took legal effect on December 21, 2015 with the registration
of the capital increase in the commercial register in Frankfurt/Main. DEMIRE AG’s takeover offer was
accepted by 77.70 % of the Fair Value REIT-AG shareholders. A total of 10,963,878 Fair Value REIT-AG
shares of the full total of 14,110,323 shares were tendered for exchange during the initial acceptance
period and the additional acceptance period that extended until December 3, 2015.
Based on a resolution of the Supervisory Board dated December 16, 2015 to amend the Articles of
Association, and entry in the commercial register on December 21, 2015, the Company’s share capital
was increased by EUR 21,927,756.00 against contribution in kind by issuing 21,927,756 new no-par
value bearer shares (no-par value shares) with a notional interest in the share capital of EUR 1.00 each.
The contribution in kind consisted of 10,963,878 shares of Fair Value REIT-AG with a notional interest in
the share capital of EUR 2.00 per share. The capital increase was recorded in the commercial register
on December 21, 2015.
Authorised Capital
Authorised Capital I/2014
By resolution of the Annual General Meeting of October 15, 2014, with the Supervisory Board’s consent,
the Executive Board was authorised to increase the Company’s share capital by issuing up to 7,064,325
new bearer shares in the form of no-par value shares with a notional interest of EUR 1.00 each against
contribution in cash and/or in kind once or several times in partial amounts of up to EUR 7,064,325.00
(Authorised Capital I/2014) until October 14, 2019. Shareholders are generally entitled to subscription
rights.
The Executive Board and Supervisory Board have resolved on December 22, 2014 to increase the
Company’s share capital from authorised capital once in the amount of EUR 5,633,710.00 – from
EUR 14,306,151 to EUR 19,939,861 – against contribution in kind and excluding shareholders’
subscription rights. Alpine Real Estate GmbH was admitted to subscribe to the new shares in return
for a contribution in kind to DEMIRE AG consisting of 94.9 % of Alpine’s interest in Hanse-Center
Objektgesellschaft mbH, 94.9 % of the interest in Glockenhofcenter Objektgesellschaft mbH and a
receivable against Hanse-Center Objektgesellschaft mbH. Hanse-Center Objektgesellschaft mbH and
Glockenhofcenter Objektgesellschaft mbH possess a commercial real estate portfolio comprising a
total of nearly 42,000 m² in Bremen, Berlin, and Stralsund. In the context of the capital increase, each
new DEMIRE AG share was assigned a value of EUR 1.75. As at the reporting date, the capital increase
against contribution in kind has not been accounted for yet because under Section 189 AktG the share
capital is effectively increased only upon the registration of the capital increase in the commercial
register. Pursuant to the resolution on the capital increase, the capital increase poses a pending
transaction that cannot be recognised in the financial statements as long as the contribution has not
been made and the execution of the capital increase is not yet entered in the commercial register.
The contribution was made with legal effect in 2015, and the capital increase was registered in the
commercial register on January 22, 2015.
The Company’s Executive Board and Supervisory Board resolved on April 8, 2015 and April 28, 2015 to
increase the Company’s share capital from authorised capital once in the amount of EUR 1,430,615.00
– from EUR 20,017,811.00 to EUR 21,448,426.00 – against contribution in kind and excluding
shareholders’ subscription rights. Ketom AG, Switzerland, was admitted to subscribe to the new shares
in return for providing a contribution in kind consisting of a 94 % interest in the project company
Sihlegg Investments Holding GmbH, Switzerland, as well as all claims from a shareholder loan granted
to the project company by Ketom AG. A value of EUR 4.028 per DEMIRE AG share was assigned to
determine the amount of the capital increase and the number of new shares to be issued. The capital
increase against contribution in kind from Authorised Capital I/2014 was carried out in the amount
of EUR 1,430,615.00 and from Authorised Capital I/2015 in the amount of EUR 751,952. The project
company owns the office and retail property Gutenberg Galerie in Leipzig with rentable space of
approximately 20,750 m².
Authorised Capital I/2014 was fully utilised for, among other things, the subscription of Alpine Real
Estate GmbH and Ketom AG and therefore now amounts to EUR 0.00.
Authorised Capital I/2015
By resolution of the Extraordinary General Meeting of March 6, 2015, with the Supervisory Board’s
consent, the Executive Board was authorised to increase the Company’s share capital by issuing up to
8,552,290 new bearer shares in the form of no-par value shares with a notional interest of EUR 1.00
each against contribution in cash and/or in kind once or several times in partial amounts of up to
EUR 8,552,290.00 (Authorised Capital I/2015) until March 5, 2020. Shareholders are generally entitled
to subscription rights.
The Executive Board and Supervisory Board resolved on April 8, 2015 and April 28, 2015 to increase
the Company’s share capital from authorised capital once in the amount of EUR 751,952.00 – from
EUR 21,448,426.00 to EUR 22,200,378.00 – against contribution in kind and excluding shareholders’
subscription rights. Ketom AG, Switzerland, was admitted to subscribe to the new shares in return for
providing a contribution in kind consisting of a 94 % interest in the project company Sihlegg Investments
Holding GmbH, Switzerland, as well as all claims from a shareholder loan granted to the project
company by Ketom AG. A value of EUR 4.028 per DEMIRE AG share was assigned to determine the
amount of the capital increase and the number of new shares to be issued. The capital increase against
contribution in kind from Authorised Capital I/2014 was carried out in the amount of EUR 1,430,615.00
and from Authorised Capital I/2015 in the amount of EUR 751,952. The project company owns the
office and retail property Gutenberg Galerie in Leipzig with rentable space of approximately 20,750 m².
The Company’s Executive Board and Supervisory Board resolved on May 18, 2015 and May 19, 2015 to
increase the Company’s share capital from authorised capital once in the amount of EUR 2,541,149.00
– from EUR 22,200,378 to EUR 24,741,527.00 – against a mixed contribution in kind and excluding
shareholders’ subscription rights. M1 Beteiligungs GmbH, Berlin, has been admitted to subscribe to the
new shares in return for contributing a 94 % interest in Logistikpark Leipzig GmbH. Logistikpark Leipzig
GmbH is the sole owner of a logistics property in Leipzig (Logistikpark Leipzig). A value of EUR 5.84
per DEMIRE AG share was assigned to determine the amount of the capital increase and the number
of new DEMIRE AG shares to be issued. In addition to the shares, M1 Beteiligungs GmbH is to receive
a cash payment of roughly EUR 19 million. The contribution, purchase and assignment agreement
governing the contribution in kind is subject, among others, to the approval of the bank financing
Logistikpark Leipzig GmbH. Following the execution of this capital increase and taking into account the
capital increase against contribution in kind to purchase Gutenberg Galerie, which was resolved by
the Executive Board on April 2, 2015, M1 Beteiligungs GmbH will hold an interest of around 10.25 % in
DEMIRE AG’s share capital.
167
168
The Executive Board and Supervisory Board resolved on July 1, 2015 to increase the Company’s share
capital from authorised capital once in the amount of EUR 2,474,152.00 – from EUR 24,741,527.00
to EUR 27,215,679.00 – against contribution in cash through the issue of 2,474,152 new no-par value
ordinary bearer shares with a notional interest in the share capital of EUR 1.00 per share.
The Company’s Annual General Meeting passed a resolution on August 28, 2015 to cancel the unutilised
Authorised Capital I/2015.
Authorised Capital II/2015
By resolution of the Annual General Meeting of August 28, 2015, with the Supervisory Board’s consent,
the Executive Board was authorised to increase the Company’s share capital by issuing up to 13,675,702
new bearer shares in the form of no-par value shares with a notional interest of EUR 1.00 each against
contribution in cash and/or in kind once or several times in partial amounts of up to EUR 13,675,702.00
(Authorised Capital II/2015) until August 27, 2020. Shareholders are generally entitled to subscription
rights.
Authorised Capital III/2015
By resolution of the Extraordinary General Meeting of September 14, 2015, with the Supervisory Board’s
consent, the Executive Board was authorised to increase the Company’s share capital by issuing up to
7,069,272 new bearer shares in the form of no-par value shares with a notional interest of EUR 1.00
each against contribution in cash and/or in kind once or several times in partial amounts of up to
EUR 7,069,272.00 (Authorised Capital III/2015) until September 13, 2020. Shareholders are generally
entitled to subscription rights.
With respect to the authorised capital above, with the Supervisory Board’s consent, the Executive Board
is authorised to exclude shareholders’ subscription rights in the following cases:
■
fractional shares
■
when the capital increase is against cash contribution and the proportional amount of the
share capital attributed to the new shares for which the subscription right is excluded does
not exceed 10 % of the share capital existing at the time the new shares are issued, and the
issue price of the new shares is not significantly less than the stock market prices of the shares
of the same class and entitlements already listed at the time of the final determination of the
issue price by the Executive Board according to Section 203 para. 1 and 2 and Section 186 para.
3 Sentence 4 AktG
■
to the extent necessary to grant holders or creditors of bonds with option or convertible rights
issued by the Company or Group companies, subscription rights to new shares to the extent
to which the holders or creditors would be entitled after exercising their option or convertible
rights
■
in the case of capital increases against contribution in kind.
Authorisation to repurchase shares
The Company has been authorised to acquire up to 10 % of the existing share capital outstanding as at
the date of authorisation from the date of the resolution on October 15, 2014 for a period of five years,
i.e. until October 14, 2019. The number of shares acquired under this authorisation together with other
Company shares already purchased by the Company or already owned, may not exceed 10 % of the
Company’s respective existing share capital.
The item “non-controlling interests” concerns interests of third-party shareholders in the equity and
net profit of fully consolidated subsidiaries. The net profit attributable to parent company shareholders
represents the difference between the net profit before the interests of non-controlling shareholders
and the interests of non-controlling shareholders reported in the statement of income.
5. Non-current liabilities
5.1 Deferred tax assets and liabilities
The entire amount of recognised deferred taxes is due after 12 months.
The deferred tax assets and liabilities are composed of temporary differences in the following balance
sheet items:
EURk
31/12/2015
31/12/2014
Tax loss carryforwards
3,937
1,345
359
531
Interest swap
Others
88
0
1,355
340
Deferred tax assets before offsetting
5,739
2,216
Offsetting
-5,595
-1,496
Deferred tax assets
144
720
28,229
10,916
6
84
3,074
528
Deferred tax liabilities before offsetting
31,309
11,528
Offsetting
-5,595
1,496
Deferred tax liabilities
25,714
10,032
Others
Deferred tax liabilities result mainly from temporary differences in the valuation of investment
properties at fair value and effects from the purchase of Fair Value REIT. In the case of Fair Value, in
addition to “inside basis differences” “outside basis differences” are also recognised in the consolidated
financial statements under the “tax transparent entities” concept. This assumes a deemed disposal of
all properties directly held by Fair Value REIT and indirectly held through trusts. Deferred taxes totalling
EURk 12,874 were recognised directly in equity as part of the initial consolidation of Fair Value REIT and
Germavest Real Estate S.à.r.l.
169
170
The requirements pursuant IAS 12.74 have been fulfilled with regard to deferred tax assets before
offsetting of EURk 3,937 (December 31, 2014: EURk 1,345) for tax loss carryforwards. According to
IAS 12.36, deferred tax assets are recognised in the amount of the deferred tax liabilities.
The changes in deferred taxes and their recognition can be represented as follows:
EURk
01/01/2015
Statement of
income
Recognised
directly in
equity
Other comprehensive
income
31/12/2015
-10,385
-4,611
-12,874
0
-27,870
-84
78
0
0
-6
0
88
0
0
88
1,345
2,592
0
0
3,937
-188
-1,531
0
0
-1,719
-9,312
-3,384
-12,874
0
-25,570
Interest swaps
Others
The item “others” contains mainly deferred taxes related to the following debt instruments: 2013/18
convertible bond, 2014/2019 corporate bond and 2014/19 Signal Capital loan.
Tax loss carryforwards and deductible temporary differences that were not taken into account
when determining deferred taxes, amounted to EURk 28,044 (December 31, 2014: EURk 14,891). Of
this amount, EURk 27,676 (December 31, 2014: EURk 14,714) is attributable to Germany, EURk 163
(December 31, 2014: EURk 145) is attributable to Romania, EURk 0 (December 31, 2014: EURk 3) to the
Ukraine and EURk 205 (December 31, 2014: EURk 29) to Georgia. In the reporting year, non-recognised
deferred tax assets amounted to EURk 5,563 (December 31, 2014: EURk 4,484).
The changes in deferred taxes during the abbreviated fiscal year and their recognition can be
represented as follows:
EURk
01/04/2014
Statement of
income
Recognised
directly in
equity
Other comprehensive
income
31/12/2015
-928
-9,457
0
0
-10,385
-238
154
0
0
-84
928
417
0
0
1,345
Others
-44
-555
411
0
-188
-282
-9,441
411
0
-9,312
5.2 Interests of minority shareholders
Interests of minority shareholders, which are recognised as liabilities, originate from Fair Value REIT
and totalled EURk 61,160 as at the balance sheet date. Compensation to non-controlling shareholders
in subsidiaries of Fair Value REIT are calculated as the proportion of minorities in the equity of each
subsidiary as at December 31, 2015 and represented either a profit (-) or loss (+) for the non-controlling
shareholders.
171
5.3 Non-current financial debt
The following table summarises the non-current financial:
Nominal
interest
rate
in %
Due date 31/12/2015 31/12/2014
EURk
EURk
1.
DEMIRE AG
2014/2019 corporate bond
7.50 16/09/2019
97,034
49,138
2.
DEMIRE AG
2013/2018 convertible bond
6.00 30/12/2018
10,201
10,424
3.
DEMIRE AG
2015/2018 mandatory convertible
bond (debt component)
2.75 22/05/2018
498
0
4.
DEMIRE AG
Signal Capital loan
9.50 31/12/2018
26,691
0
5.
DEMIRE Holding EINS GmbH
Deutsche Bank promissory note loan
5.00 09/12/2019
142,515
142,320
6.
DEMIRE Commercial Real Estate
GmbH
LBBW loan A
2.25 31/01/2019
26,115
26,666
7.
GmbH
LBBW loan B
1.80 31/01/2019
6,794
6,792
8.
GmbH
HFS bond
15.00 15/01/2017
27,155
0
9.
DEMIRE Real Estate München l
GmbH
IBB amortising loan
3.00 31/12/2016
290
8,018
10. Munich ASSET Vermögensverwaltung GmbH
Hypo Landesbank Vorarlberg amortising loan
1.75 31/08/2018
0
4,734
11. TGA Immobilien Erwerb 1 GmbH
Volksbank Mittweida loan
3.25 28/02/2025
4,229
0
12. Logistikpark Leipzig GmbH
DG Hyp loan
2.40 30/06/2020
29,324
0
13. Hanse-Center Objektgesellschaft
mbH
LBB amortising loan
3.74 31/08/2018
4,112
0
14. Sihlegg Investments Holding GmbH
HypoNoe loan
3.00 31/12/2020
11,243
0
15. Germavest Real Estate S.à.r.l.
Notes A
3.91 20/02/2033
58,232
0
16. Germavest Real Estate S.à.r.l.
Notes B
5.25 20/02/2021
38,693
0
17. Fair Value REIT-AG
Convertible bond
4.50 19/01/2017
159
0
WIB Westdeutsche Immobilienbank AG
amortising loan
2.55 30/06/2019
8,995
0
amortising loan
1.27 30/06/2019
4,855
0
amortising loan
1.27 30/06/2019
1,970
0
21. IC 13
Stadt-Sparkasse Langenfeld amortising
loan
1.55 30/03/2020
2,638
0
22. BBV 08
Unicredit Bank AG amortising loan
2.90 30/09/2025
14,947
0
23. BBV 08
2.90 29/12/2023
2,051
0
24. BBV 10
1.97 31/03/2016
23,315
0
25. BBV 10
2.05 31/03/2016
1,637
0
26. BBV 10
2.05 31/03/2016
6,982
0
27. BBV 10
BBV Bayerische Beamten Lebensversicherung a.G. amortising loan
3.90 31/12/2016
19,739
0
28. BBV 14
Deutsche Genossenschafts-Hypothekenbank amortising loan
1.38 31/03/2020
30,911
0
29. IC 15
Sparkasse Südholstein amortising loan
2.71 30/01/2018
7,294
0
177
0
608,796
248,092
31. Other financial debt
172
The effective interest rate of the first tranche of the 2014/2019 corporate bond is 7.99 %, 7.60 % for
the second tranche and 5.70 % for the promissory note from Deutsche Bank. For all other non-current
financial debt, the nominal interest rate closely corresponds to the effective interest rate because only
marginal transaction costs were incurred.
The nominal value of the 2014/2019 corporate bond of DEMIRE AG is EURk 100,000; EURk 10,662 for the
2013/2018 convertible bond of DEMIRE AG; EURk 32,000 for the Signal Capital loan; EURk 148,000 for
the Deutsche Bank promissory note for DEMIRE Holding EINS GmbH; EURk 27,500 for the LBBW loan
A for DEMIRE Commercial Real Estate GmbH; EURk 7,000 for the LBBW loan B for DEMIRE Commercial
Real Estate GmbH; and EURk 8,225 for the IBB amortising loan for DEMIRE Real Estate München I
GmbH.
Of the non-current financial debt, an amount of EURk 500,727 (previous year: EURk 213,225) is secured
by assets. No liabilities have been encumbered with a mortgage as a guarantee for third-party liabilities
(previous year: EURk 201,225).
Pursuant to the business pledging agreement dated November 13, 2014, DEMIRE AG pledged all its
interests in the subsidiary DEMIRE Condor Properties Management GmbH in an amount of EURk 28,
including all related rights, to guarantee the loan taken out by the subsidiary DEMIRE Condor Properties
Management GmbH, including accrued interest of EURk 12,567.
Pursuant to the notarised declaration of December 17, 2014, DEMIRE AG accepted all current, future
and contingent claims of bondholders up to a maximum amount of EURk 33,360 for the bearer bond
issued by the subsidiary DEMIRE Commercial Real Estate GmbH, Frankfurt/Main. To secure the claims
of this bearer bond, DEMIRE AG has pledged all its interests in the subsidiary DEMIRE Commercial Real
Estate GmbH in the amount of EURk 9,683.
Generally, all loan agreements for the properties financed stipulate information requirements that
DEMIRE’s subsidiaries as debtors must fulfil with respect to the banks or investors as creditors.
Depending on the type and scope of the loan agreement, the information requirements range from
providing key financial ratios (e.g. financial statements) to reporting of the compliance with covenants.
The covenants concern financial ratios, particularly the debt service cover ratio (DSCR), the interest
cover ratio (ICR) and the loan-to-value (LTV) of the respective real estate portfolio. The calculation is
based on the specifications set by the creditors in the loan agreement. The significant financial debt with
covenants held by the DEMIRE Group is the Deutsche Bank promissory note for the Condor real estate
portfolio with a nominal amount of EUR 148 million, the 2014/2019 corporate bond with a nominal
amount of EUR 100 million, the 2013/2018 convertible bond with an issue volume of EUR 11.3 million,
the 2015/2018 mandatory convertible bond with an issue volume of EUR 15 million, the Signal Capital
loan with a nominal amount of EUR 32 million and the LBBW loan for the Alpha real estate portfolio
with a volume of EUR 27.5 million.
The monitoring, compliance and reporting of the covenants specified in the loan agreements for
the properties financed is carried out by DEMIRE’s management, treasury and asset management.
Depending on the financing, the covenants are reported to the creditors on a quarterly, semi-annual or
annual basis or creditors are provided with the underlying economic ratios. If DEMIRE fails to comply
with the covenants, the creditors are entitled to demand additional guarantees from the debtor. In that
case, the loans would be in default. If the default persisted for a longer period of time and could not
permanently be resolved, the creditors have a special right of termination.
DEMIRE complied with all covenants for real estate financing as at the balance sheet date and in the
course of the new fiscal year and, therefore, was not in default.
In the 2014 fiscal year, DEMIRE AG placed a corporate bond with a total issue volume of EURk 50,000.
The corporate bond has a term of five years and is due on September 16, 2019. The bond has a coupon
of 7.50 % per annum payable semi-annually in arrears to investors. The corporate bond started trading
on the Open Market of the Frankfurt Stock Exchange under ISIN DE000A12T135 on September 16, 2014.
The senior unsecured bond issued in a private placement is divided into 50,000 fractional bearer bonds
with a nominal value of EURk 1 per fractional bond.
By resolution of March 24, 2015, with the approval of the Supervisory Board, DEMIRE’s Executive Board
increased the 2014/2019 corporate bond from September 2014 by a further EURk 50,000 to a total of
EURk 100,000. The development of the 2014/2019 corporate bond is illustrated in the following table:
EURk
As at January 1, 2015
Carrying amount
2014/2019
corporate bond
50,000
Partial repurchase of 2014/2019 corporate bond
-20,000
Exchange of fractional bonds of 2014/2019 corporate bond for
2015/2018 fractional mandatory convertible bonds
-15,000
Placements in 2015
85,000
As at December 31, 2015
100,000
In December 2015, the Company placed additional fractional bonds with a nominal value of
EURk 10,880 and exercised its call option for the same amount against the seller of the T6 portfolio.
As at December 30, 2015, the put option was exercised by the seller of the T6 portfolio. That portion
of the bond in the amount of EURk 14,375, which could not be placed until December 31, 2015, was
repurchased by DEMIRE AG. The bonds amounting to EURk 14,375 were not posted to the Company’s
account until January 2016, which meant that the 2014/2019 bond was valued on December 31, 2015
with a total nominal value of EURk 100,000. Following the partial redemption of the fractional bonds,
in January 2016 the bond’s nominal amount stood at EURk 85,625.
173
174
The terms and conditions of the 2014/2019 bond contain provisions regarding required financial
covenants, which, if not met, could result in extraordinary termination by the bondholders and thus
repayment obligations for the Company as well as restrictions on distributions made by the Company.
The financial covenants concern financial ratios, in particular, the loan-to-value ratio (LTV) and the
Company’s equity ratio. Monitoring, compliance and reporting of financial covenants is conducted by
DEMIRE’s management and its Treasury and Asset Management departments. Should DEMIRE fail to
comply with the covenants, the creditors would be entitled to demand additional guarantees from the
debtor. In that case, the loans would be in default. If the default persisted for a longer period of time
and could not permanently be resolved, the creditors have a special right of termination. As at the
balance sheet date, DEMIRE had complied with all financial covenants and, therefore, there was not in
default.
Convertible bonds (2013/2018 CB)
By resolution of the Annual General Meeting of October 23, 2013, the Executive Board was authorised,
with the consent of the Supervisory Board, to issue bearer and/or registered convertible bonds and/
or bonds with warrants once or on several occasions until September 30, 2018, for a total nominal
amount of up to EURk 50,000 with or without a limitation on the duration and to offer holders or
creditors of bonds option or conversion rights new no-par value bearer shares of the Company with
a notional interest in the share capital of up to EURk 25,000 according to the convertible bonds’ more
detailed specifications of the terms and conditions.
In December 2013, DEMIRE AG issued convertible bonds in a total nominal amount of EURk 11,300
maturing on December 30, 2018. The convertible bonds are divided into 11,300,000 fractional bonds,
each with a nominal value of EUR 1.00.
The details of the convertible bonds are as follows:
■They are divided into a maximum of 11,300,000 bearer fractional bonds, each with a nominal
value of EUR 1.00 and carrying equal rights.
■
During the bond’s term, holders have the irrevocable right during the conversion periods to
convert each convertible bond with a nominal value of EUR 1.00 initially into one no-par value
share of DEMIRE Deutsche Mittelstand Real Estate AG with a notional interest in share capital
of EUR 1.00 each. By resolution of the creditors’ meeting of September 30, 2014, the terms
and conditions of the convertible bonds have been amended so that cash compensation is no
longer possible.
■
In case of the effective exercise of the conversion right, the conversion price amounts to
EUR 1.00 per ordinary bearer share, each with a notional interest in the share capital of
EUR 1.00. The conversion price may be subject to adjustments due to adjustment provisions
contained in the bonds’ terms and conditions. This corresponds to a conversion ratio of 1:1.
The terms and conditions do not provide for cash settlement.
■The issue price per convertible bonds is EUR 1.00 and corresponds to the nominal value and
initial conversion price.
■The convertible bonds yield 6.00 % interest per annum. The interest is payable on March 30,
June 30, October 30 and December 30 of each year during the term of the convertible bonds.
Following the exercise of 226,800 conversion rights from the 2013/2018 convertible bond, the
company’s share capital was increased by 226,800 no-par value bearer shares with a notional interest
of EUR 1.00.
As a result of the change in the terms and conditions of the 2013/18 convertible bond on September
30, 2014, the previous debt instrument was derecognised, and a new debt instrument was recognised.
The debt instrument was replaced because the change in the terms and conditions was considered a
material change in the contract conditions as defined by IAS 39.40. The previous debt instrument was
carried at fair value until September 30, 2014, and the new debt instrument was carried at amortised
cost from September 30, 2014. According to IAS 32.28, the new debt instrument must be divided into
a debt and equity component.
According to IAS 32.31 ff., the division into a debt and equity component must be carried out under
the residual value method. A term-equivalent credit spread on the risk-free interest rate was used to
measure the debt component at the time of initial recognition on September 30, 2014. The resulting
value for the debt component amounted to EURk 10,418. The difference between the amount of the
“new” convertible bond on September 30, 2014 (EURk 10,909), and the value of the debt component
was recognised as an equity component totalling EURk 490. This difference was recognised in the
previous year directly in equity.
With regard to the corresponding effects on the statement of income, we refer to Note D.12.
Mandatory convertible bond (2015/2018 MCB)
In May 2015, a mandatory convertible bond with a volume of EURk 15,000 was issued with the exclusion
of shareholders’ subscription rights against contribution in kind. In the context of the transaction,
an investor in the 2014/2019 corporate bond (Open Market of the Frankfurt Stock Exchange; ISIN
DE000A12T135/ WKN: A12T13; volume EURk 100,000) subscribed to the mandatory convertible
bond issued with a term of three years (maturing in 2018) by contributing fractional bonds from the
2014/2019 corporate bond. The bonds carry an interest coupon of 2.75 % per annum starting from
the date of issue and may be converted from the date of September 1, 2015 into shares at an initial
conversion price of EUR 5.00 per share, subject to adjustments. The mandatory convertible bond is
equipped with a conversion obligation of the respective creditor upon the bond’s maturity.
175
176
The convertible bonds placed by DEMIRE AG on May 22, 2015 with a term until May 22, 2018 and a total
nominal value of up to EURk 15,000 are divided into 150 bonds with a nominal value of EURk 100 each.
The details of the convertible bonds are as follows:
■They are divided into a maximum of 150 bearer fractional bonds, each with a nominal value of
EURk 100 and carrying equal rights.
■
Bondholders have the right to convert each bond in whole, but not in part, during the bond’s
term, into no-par value shares (no-par value shares) with a notional interest in the Company’s
share capital on the issue date of EUR 1.00.
■
In case of the effective exercise of the conversion right, the conversion price amounts to
EUR 5.00 per no-par value share, subject to adjustments due to adjustment provisions included
in the terms and conditions of the bonds. The conversion ratio is calculated by dividing the
bond’s principal amount by the conversion price applicable on the exercise date.
■The bonds bear 2.75 % interest per annum with interest payable quarterly in arrears on the
dates of March 22, June 22, September 22 and December 22 in each year during the term of
the convertible bonds.
The bonds may be callable under certain conditions by the convertible bond holders, in which case
a prepayment penalty in the amount of 15.00 % on the principal amount plus accrued interest until
the date of actual redemption would be due for redemption. Grounds for calling the bonds include,
among others, non-delivery of shares or failure to meet key obligations under the respective 2015/2018
mandatory convertible bond; failure to meet payment obligations under other financial liabilities
(cross default); bankruptcy and initiation of insolvency proceedings by the Company or its significant
subsidiaries and dropping below an equity ratio of 20 % from December 31, 2016. In the case of a
change in control and a merger of the issuer, the bonds may be callable and may be redeemed early
with a prepayment penalty equal to 15 % of the principal amount plus accrued and unpaid interest. The
issuer may redeem the bonds early in the event that the aggregate principal amount of the outstanding
bonds falls below 25 % of the bonds’ originally issued aggregate principal amount. No conversions took
place during the reporting period.
In DEMIRE’s IFRS consolidated financial statements, the equity component of the 2015/2018 mandatory
convertible bond was recognised directly in equity as an equity instrument amounting to EURk 13,899
due to the bond’s terms and conditions. Additionally, deferred tax assets of EURk 324 were recognised
directly in equity. The effective interest rate for the debt component of EURk 498 is 7.57 %.
HFS bond
On December 17, 2014, DEMIRE Commercial Real Estate GmbH, as the capital recipient, issued a
subordinated bond in the nominal amount of EURk 27,800 to HFS Helvetic Financial Services AG, as
the trustee, to finance the acquisition of the Alpha Portfolio (the “HFS subordinated bond”). Financing
consists of EURk 25,000 for the capital recipient, EURk 2,050 of financed interest, EURk 625 of a financed
one-time processing fee and EURk 213 of a financed escrow payment. The HFS subordinated bond’s
original maturity was December 15, 2015 and was prematurely prolonged in October 2015 for another
year until December 15, 2016. The bond’s interest is 15 % p.a. with a minimum interest of EURk 2,039
p.a. The trustee has an extraordinary termination right, especially if the debtor were to violate certain
contractual monthly information obligations. By agreement dated October 7, 2015, the term of this
subordinated bond was extended for another year until December 15, 2016. During the extension
period, a special allowance of 5 % p.a. is to be paid with half of the amount due on June 15, 2016
and the remaining half on December 15, 2016. No costs were incurred for this extension. DEMIRE
Commercial Real Estate GmbH may terminate the HFS subordinated bond with a period of four weeks.
On December 2, 2015, the HFS subordinated was prolonged by one month to January 15, 2017.
Signal Capital loan
On December 30, 2015, DEMIRE AG concluded a three-year loan agreement for a volume of EURk 32,000
with Signal Credit Opportunities (Lux) Investco II S.à.r.l. involving other parties (a loan mediator,
among others). Under this agreement, DEMIRE AG is entitled to call the loan after a minimum term
of two years. The loan has an interest rate equal to EURIBOR plus a margin of 9.5 %, but not less than
9.5 %. Interest payments are to be made quarterly at the end of each quarter. A fee of EURk 1,920 has
already been paid to the loan agent for negotiating the loan. The agent is due to receive a further fee of
EURk 3,200 at the time of the loan’s repayment (equivalent to a present value of EURk 2,985 as at the
balance sheet date). Both amounts are accounted for under the effective interest method.
The loan amount was specified for (i) the purchase of fractional bonds in the amount of approx.
EURk 15,522 from the 2014/2019 corporate bond issued by DEMIRE AG that was used to pay the
purchase price to the seller of Germavest Real Estate S.à.r.l. and transferred with a repurchase
obligation, (ii) the payment of a deferred residual purchase price in the amount of approx. EURk 4,274
for the acquisition of Germavest Real Estate S.à.r.l, (iii) the payment of financing costs in the amount
of approx. EURk 1,300, (iv) a pro rata payment of the purchase price for the acquisition of Kurfürster
Immobilien GmbH by DEMIRE Real Estate FÜNF GmbH in the amount of approx. EURk 8,983, and (v)
payment of the placement fee.
For information on the collateral provided by DEMIRE AG to the lender, we refer to Note E. 8.
The loan agreement with Signal Credit Opportunities (Lux) Investco II S.à.r.l provides for compliance with
financial covenants according to which the “debt cervice cover” (DSC), “interest cover” (IC) and “loan-tovalue” (LTV) ratios, based on the Group, must reach or may not exceed the specific set thresholds. In
addition, minimum liquidity of EURk 4,000 must be maintained in the Group over the term of the loan
and certain transactions and management measures may not be carried out without the prior consent
177
178
of the lender, whereby the permissible scope for action on the part of the companies included is defined
in detail. DEMIRE AG is also subject to extensive disclosure requirements, particularly with respect to
its net assets and results of operations. The guarantees provided by DEMIRE AG and its subsidiaries
under the loan agreement, including at the time of concluding the contract and the time of payment
recur at the beginning of each interest period so that the state of the guarantees is maintained over the
life of the loan. This is particularly relevant with respect to the extensive commitments to ensure and
maintain the property values held by the subsidiaries.
Breaches of commitments under the loan agreement and other financing agreements can justify the
lender’s right to terminate the loan. DEMIRE AG is prohibited from assigning or transferring its rights
and obligations under the loan agreement.
5.4 Other non-current liabilities
Other non-current liabilities of EURk 1,076 consist of liabilities to former non-controlling shareholders
of subsidiaries. Amounts owed to former non-controlling shareholders concern primarily receivable
settlement credits due to termination of the shareholder relationship. In some cases, the respective
company is entitled to pay the receivable settlement credits in three or five annual instalments,
whereby interest of 4 % per annum is payable on the respective unpaid amount; in one case interest
equal to the respective EURIBOR rate (12 months). It is assumed that receivable settlement credits will
be paid on a pro rata basis by a subsidiary of Fair Value REIT-AG. Non-current liabilities to former noncontrolling shareholders amounted to EURk 1,071 in the past fiscal year.
6. Current liabilities
6.1. Provisions
EURk
31/12/2015
31/12/2014
Staff costs
513
394
Others
653
458
1,166
852
Total
EURk
31/12/2014
Utilisation
Reversal
Additions
31/12/2015
Staff costs
394
219
21
359
513
Others
458
166
16
377
653
Total
852
385
37
736
1.166
The Company expects to utilise the provisions in the coming 2016 fiscal year because all provisions are
short-term in nature.
Provisions related to staff costs primarily consist of obligations resulting from the performance-based,
variable remuneration of the Executive Board and variable staff costs.
Other provisions include mainly EURk 330 for building maintenance and EURk 300 for pending damage
claims.
6.2. Trade payables and other liabilities
EURk
31/12/2015
31/12/2014
Trade payables
9,179
7,009
Outstanding invoices
3,153
0
355
1,032
Accounting and audit costs
1,644
806
Former non-controlling shareholders
1,039
0
Liabilities from value-added taxes
865
363
Deposits received
705
151
Purchase price liabilities
187
730
49
69
Interest liabilities
Supervisory Board compensation
Personnel-related expenses
434
11
2,277
1,348
19,887
11,519
Others
Total
Trade payables amounting to EURk 9,179 (December 31, 2014: EURk 7,009) are all due to third parties
and are entirely short-term in nature, as was the case as at December 31, 2014.
The liabilities for accounting and audit costs include costs for the preparation, audit, and publication of
the financial statements and the consolidated financial statements.
Liabilities for outstanding invoices were recognised for services received.
6.3. Tax liabilities
Current income tax liabilities of EURk 3,801 (December 31, 2014: EURk 314) relate to trade taxes
(EURk 524; December 31, 2014: EURk 118) and corporate taxes (EURk 3,277; December 31, 2014:
EURk 196). Corporate tax liabilities of EURk 1,796 concern the assessment years 2009 through 2012 of
179
180
6.4. Current financial debt
The following table summarises the current financial debt.
Nominal
interest
rate
in %
Due date
31/12/2015
TEUR
31/12/2014
TEUR
1.
DEMIRE AG
7.50
16/09/2019
1,740
0
2.
DEMIRE AG
2013/2018 convertible bond
6.00
30/12/2018
110
0
3.
DEMIRE AG
2015/2018 mandatory convertible
bond (debt component)
2.75
22/05/2018
391
0
4.
DEMIRE AG
Signal Capital loan
9.50
31/12/2018
2,038
0
5.
Deutsche Bank promissory note loan
5.00
31/12/2015
740
740
6.
GmbH
LBBW loan A
2.25
31/12/2015
0
834
7.
GmbH
LBBW loan B
1.80
31/12/2015
0
208
8.
DEMIRE Real Estate München l
GmbH
IBB amortising loan
3.00
31/12/2015
8,083
200
9.
Munich ASSET Vermögens
verwaltung GmbH
Hypo Landesbank Vorarlberg amortising loan
1.75
31/12/2015
0
172
10.
1. MAGNAT Immobilienges. mbH
DKB loan
3.00
30/06/2016
2,400
3,183
11.
Hanse-Center Objektgesellschaft
LBB loan
3.74
30/12/2016
31
0
12.
Sihlegg Investments Holding GmbH
HypoNoe loan
3.00
31/12/2020
268
0
13.
Logistikpark Leipzig GmbH
DG Hyp loan
2.40
30/06/2020
900
0
14.
TGA Immobilien Erwerb 1 GmbH
Volksbank Mittweida loan
3.25
28/02/2025
254
0
16.
Notes A
3.91
20/02/2033
1,173
0
17.
Notes B
5.25
20/02/2021
8,751
0
18.
Fair Value REIT-AG
Convertible bond
4.50
19/01/2020
8,714
0
19.
Fair Value REIT-AG
amortising loan
5.20
31/08/2016
1,908
0
20.
Fair Value REIT-AG
amortising loan
2.55
30/06/2019
400
0
21.
Fair Value REIT-AG
amortising loan
1.27
30/06/2019
192
0
22.
Fair Value REIT-AG
amortising loan
1.27
30/06/2019
240
0
23.
Fair Value REIT-AG
Stadt-Sparkasse Langenfeld amortising
loan
1.55
30/03/2020
80
0
25.
BBV 02
Bayer. Beamten Lebensvers. a.G.
amortising loan
5.80
31/05/2016
138
0
26.
BBV 02
amortising loan
6.15
31/05/2016
823
0
27.
BBV 02
amortising loan
6.15
31/05/2016
119
0
28.
BBV 02
amortising loan
3.90
31/12/2016
1,240
0
29.
BBV 08
2.90
29/12/2023
230
0
30.
BBV 08
2.90
30/09/2025
1,348
0
31.
BBV 10
1.97
31/03/2016
1,171
0
32.
BBV 10
2.05
31/03/2016
97
0
181
Nominal
interest
rate
in %
Due date
31/12/2015
TEUR
31/12/2014
TEUR
33.
BBV 10
2.05
31/03/2016
317
0
34.
BBV 14
Deutsche GenossenschaftsHypothekenbank amortising loan
1.38
31/03/2020
1,300
0
35.
IC 15
Sparkasse Südholstein amortising loan
2.71
30/01/2018
221
0
36.
Mezzanine loan
7.50
11/06/2015
0
12,047
37.
Magnat Investment l B. V.
Mezzanine loan
12.00
30/11/2015
0
5,020
38.
GmbH
Bond
9.00
15/01/2017
384
25,088
39.
Sonstige Finanzverbindlichkeiten
642
81
46,443
47,573
The nominal interest rate closely corresponds to the effective interest rate because only minimal
transaction costs were incurred.
A convertible bond with a total nominal value of EURk 8,460, an interest rate of 4.5 % p. a. and a
term of 5 years was issued based on a decision by the Management Board of Fair Value REIT-AG
on January 14, 2015. The bond was admitted for trading on the Open Market (Quotation Board) on
January 19, 2015. The convertible bond was redeemed in 2016.
Of the current financial debt, a total of EURk 34,462 is secured by assets.
7. Operating leases - The Group as lessor
The minimum lease payments consist of the net rents payable until the agreed end of the contract or
until the earliest possible termination date available to the lessee (tenant), regardless of whether a
termination or non-utilisation of an extension option should actually be expected. Rent agreements are
usually concluded over fixed minimum terms of up to ten years. In some cases, tenants are entitled to
extension options. In these cases, contractual rent escalation clauses effectively reduce the market risk
of a long-term commitment. In the case of unlimited tenancies, a remaining term of the rental period
of five years was assumed after the fifth year.
Fixed future claims for minimum lease payments from long-term operating leases of rented commercial
real estate amounted to:
EURk
31/12/2015
31/12/2014
72,583
23,960
between one and five years
216,097
117,694
after more than five years
134,747
85,754
Total future rental income
423,427
227,408
within one year
182
The following amounts were recognised in the reporting period as rental income (excluding ancillary
costs):
EURk
Rental income
(from investment properties)
Rental income
(from real estate inventory)
Total
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
33,141
3,154
179
221
33,320
3,375
8. Contingent liabilities
The following contingent liabilities existed as at the reporting date for circumstances for which the
DEMIRE AG and its subsidiaries have guarantees in favour of various contract partners.
As at December 31, 2015, contingent liabilities included mortgages of EURk 839,990 pursuant to
Section 1191 BGB. The maximum contingent liability amount related to these properties is limited to
the carrying amount of EURk 640,281 recognised on the balance sheet date. During the reporting year,
mortgages of EURk 21,339 were removed from the land registry.
Pursuant to the notarised declaration of December 17, 2014, DEMIRE AG accepted all current, future
and contingent claims of bondholders up to a maximum amount of EURk 33,360 for the bearer bond
issued by the subsidiary DEMIRE Commercial Real Estate GmbH, Frankfurt/Main. To secure the claims
of this bearer bond, DEMIRE AG has pledged all its interests in the subsidiary DEMIRE Commercial
Real Estate GmbH in the amount of EURk 9,683. The declaration continues to apply following the
bond’s prolongation on December 15, 2015. The underlying obligations can be met by the companies
concerned according to our knowledge. For this reason, as at the balance sheet date, the probability of
a claim is estimated as low.
Pursuant to the business pledging agreement dated November 13, 2014, relating to the mezzanine
loan granted by LSREF II Caliburn BFL Limited, Dublin, Ireland, to the group company DEMIRE Condor
Properties Management GmbH, the Company pledged all its interests in the subsidiary DEMIRE Condor
Properties Management GmbH in an amount of EURk 28, including all related rights.
In the loan agreement with Signal Credit Opportunities (Lux) Investco II S.A.R.L. dated December 30, 2015,
DEMIRE AG has pledged as collateral in favour of the lender all of the interests held in its subsidiaries
DEMIRE Commercial Real Estate DREI GmbH, DEMIRE Commercial Real Estate FÜNF GmbH, HanseCenter Objektgesellschaft mbH and Glockenhofcenter Objektgesellschaft GmbH and an account at
Deutsche Bank for all payments of the preceding companies. In addition, DEMIRE AG ceded its claims
to all group loans and Logistikpark Leipzig GmbH ceded its claims to all loans granted to DEMIRE AG
as collateral in favour of the lender. Furthermore, the claims arising from group loans between the
companies above were made subordinate to the lender’s claims.
DEMIRE AG entered into a letter of guarantee in the amount of EURk 940 in connection with the loan
granted to TGA Immobilien Erwerb 1 GmbH by Volksbank Mittweida on May 13, 2015. According to
our knowledge, the underlying obligations can be met by the company concerned. For this reason, the
probability of a claim as at the balance sheet date is estimated as low.
9. Other financial obligations
As at the reporting date, the following other financial obligations were in place:
Rent and leasing obligations for vehicles
(EURk)
31/12/2015
31/12/2014
Due within one year
61
37
Due within 1 and 5 years
59
42
120
79
31/12/2015
31/12/2014
Total
Rent and leasing obligations for office space
(EURk)
Due within one year
96
67
376
268
Total
472
335
The obligations from rental and lease agreements resulted primarily from the rental of office space
under indefinite operating leases without purchase options.
Obligations under third-party management of real estate
(EURk)
31/12/2015
Due within one year
907
42
Total
949
The asset management contract for the properties of Germavest Real Estate S.à.r.l. reported under
current liabilities has a contractual term until 2033 but may be terminated annually resulting in an
irrevocable obligation for the upcoming fiscal year only.
During the reporting period, the following amounts were recognised as lease expenses:
EURk
Vehicles
Office space
Total
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
49
27
95
65
144
92
Other financial obligations as at December 31, 2015, in the amount of around EURk 12,200 resulted
from real estate purchase agreements concluded in the 2015 reporting period that have not been
closed as at the balance sheet date.
183
184
Contractual obligations for conversion and expansion work exist at the Eschborn property. The scope
of this work has been specified but the final costs had not yet been determined as at the balance sheet
date. Additional contractual obligations to purchase, construct, develop, repair, maintain or improve
investment properties do not exist.
Purchase commitments for commissioned maintenance amounted to EURk 1,300.
A commitment to future leasehold payments from a long-term building lease contract (expiry 24 years)
results in payments of EURk 4 annually. The contract contains indexation clauses.
F. Notes to the consolidated statement of cash flows
Cash flow from operating activities is calculated using the indirect method. In this calculation, a
distinction was made between operating, investing and financing activities. Cash flow from investing
and financing activities are calculated on a payment-related basis.
In the 2015 fiscal year, cash flow from operating activities of EURk 10,815 exceeded the level in
the abbreviated 2014 fiscal year (EURk -3,986) by EURk 14,801. Cash flow from operating activities
is based on the Group profit/loss before taxes (EBT) of EURk 33,012 adjusted for the interest result
of EURk -25,728 (abbreviated 2014 fiscal year: EURk -2,938), fair value adjustments on investment
properties under IAS 40 of EURk 18,471 (abbreviated 2014 fiscal year: EURk 63,608) and the profit
originating from a purchase below market value of EURk 33,217 (abbreviated 2014 fiscal year: EURk 0).
The acquisitions in the abbreviated 2014 fiscal year offered considerable appreciation potential due
to the acquisition circumstances, whereas most of the property acquired during the fiscal year was
acquired at a purchase price equal to its fair value. The majority of the valuation gains in the amount
of EURk 6,647 are attributed to the Logistikpark property in Leipzig. Negative goodwill of EURk 33,217
resulting from the acquisition of Germavest Real Estate S.à.r.l. was recognised in the reporting year
through profit or loss under other operating income.
Other adjustments include other non-cash items such as the profit/loss from investments accounted
for using the equity method of EURk 500 (abbreviated 2014 fiscal year: EURk -1,014), depreciation/
amortisation and impairment of EURk 2,846 (abbreviated 2014 fiscal year: EURk 693) and changes
in provisions of EURk 4,462 (abbreviated 2014 fiscal year: EURk 2,290) as well as changes in working
capital.
Interest proceeds amounted to EURk 165 in the 2015 fiscal year (abbreviated 2014 fiscal year: EURk 293).
A total of EURk 186 (abbreviated 2014 fiscal year: EURk 22) of income taxes included in the net profit/
loss for the period were paid.
In the 2015 fiscal year, DEMIRE’s cash flow from investing activities amounted to EURk -29,165 compared
to EURk -255,206 in the abbreviated 2014 fiscal year.
» Notes to the consolidated balance sheet | Notes to the consolidated statement of cash flows
In the 2015 fiscal year, cash flow from investing activities included payments for investments in property,
plant and equipment of EURk -11,258 compared to EURk -11,356 in the abbreviated 2014 fiscal year.
In the 2015 fiscal year this concerned advance payments related to the Kurfürsten-Galerie property in
Kassel and, in the abbreviated fiscal year, to advance payments for a property in Leverkusen.
Payments for the purchase of investment properties and interests in fully consolidated companies, less of
cash acquired, amounted to EURk -15,238 in fiscal year 2015. This amount concerns the cash components
of the acquisitions of Logistikpark Leipzig GmbH, Hanse-Center Immobilienobjektgesellschaft GmbH,
Glockenhofcenter Immobilienobjektgesellschaft GmbH and the purchase of an additional property in
Schwerin.
The purchase of interests in fully consolidated subsidiaries as part of a business combination, less net
cash acquired totalling EURk -4,319, relates to the purchase price paid for the interest in Germavest
Real Estate S.à.r.l., less net cash of Fair Value REIT in the amount of EURk 16,028, whose interest has
been acquired on a fully non-cash basis through a share exchange.
In the 2015 fiscal year, DEMIRE’s cash flow from financing activities amounted to EURk 42,420 compared
to EURk 259,634 in the abbreviated 2014 fiscal year. This decline resulted from the high portion of
equity-financed acquisitions in the form of capital increases against contribution in kind in the 2015
fiscal year.
Proceeds of EURk 11,158 resulted from the cash capital increase, which was completed in mid-2015.
Costs of raising equity of EURk 1,514 were incurred for capital increases related to acquisitions and the
takeover of Fair Value REIT-AG in the fiscal year.
Proceeds from the issue of bonds in the amount of EURk 36,023 were related to new subscription to
the 2014/2019 corporate bond. Proceeds in the 2015 fiscal year from the issue of third-party loans
amounted to EURk 54,700 compared with EURk 261,738 in the abbreviated 2014 fiscal year and
resulted mainly from taking out of a loan from Signal Capital for a nominal EURk 32,000 to acquire
the interest in Germavest Real Estate S.à.r.l. (T6 property portfolio) in October 2015 and make the
prepayment for Kurfürstengalerie, assuming the real estate loan from Volksbank Mittweida amounting
to EUR 4.7 million for the purchase of a second property in Schwerin and assuming of a loan from Hypo
NOE in the amount of EUR 11.5 million. The inflow of funds was used to pay interest of EURk 21,255 and
repay financial debt of EURk 36,692.
Change in cash and cash equivalents (cash funds)
At the beginning of the 2015 fiscal year, cash and cash equivalents equalled EURk 4,397. During the
year, there were changes in the cash and cash equivalents totalled EURk 24,070, particularly from the
purchase of Fair Value REIT-AG in the amount of EURk 16,028. Cash and cash equivalents at the end of
the 2015 fiscal year amounted to EURk 28,467.
185
186
At the beginning of the abbreviated 2014 fiscal year, cash and cash equivalents totalled EURk 3,955.
The net change in cash and cash equivalents amounted to EURk 442. Together with the change due to
currency translation effects of EURk 0 cash and cash equivalents at the end of the abbreviated fiscal
year ending on December 31, 2014, totalled EURk 4,397.
G. Notes to the consolidated statement of changes in equity
1. Notes to the consolidated statement of changes in equity for the period from
January 1, 2015 to December 31, 2015
In the reporting year, subscribed capital rose by EURk 227 as a result of conversions of 2013/2018
convertible bonds. Furthermore, capital increases against contribution in kind relating to the
acquisition of new properties resulted in an increase in subscribed capital of EURk 32,285. These capital
increases concern the acquisition of Hanse-Center Objektgesellschaft mbH and Glockenhofcenter
Objektgesellschaft mbH (EURk 5,634), Sihlegg Investments Holding GmbH (EURk 2,183), Logistikpark
Leipzig GmbH (EURk 2,541) and Fair Value REIT-AG (EURk 21,928). A 10 % cash capital increase was
concluded on July 14, 2015. The 2,474,152 new no-par value bearer shares (no-par value shares) were
of a private placement. Upon the entry into the commercial register, DEMIRE AG’s share capital rose
by EURk 2,474. The issue price of the new shares was EUR 4.51 and resulted in proceeds for the
Company from the cash capital increase of EURk 11,158. The new shares are entitled to dividends as
of January 1, 2015.
Capital reserves represent the amount received through a capital increase against contribution in
kind above the nominal value and the difference of the subscribed capital to the sum of the share
capital of the economic parent company and the acquisition cost for the acquisition of DEMIRE AG
under a reverse merger in prior years. The increase in capital reserves of EURk 112,887 compared to
December 31, 2014 is mainly the result of capital increases against contribution in kind and the equity
portion of the mandatory convertible bond. The increases against contribution concern the purchase
of Fair Value REIT-AG (EURk 69,720), Logistikpark Leipzig GmbH (EURk 12,299), Sihlegg Investments
Holding GmbH (EURk 6,609) and Hanse-Center Objektgesellschaft mbH and Glockenhofcenter
Objektgesellschaft mbH (EURk 4,225). Capital reserves also increased as a result of the cash capital
increase (EURk 8,684) and the equity component of the 2015/2018 mandatory convertible bond,
including deferred tax assets of EURk 14,223. The costs to raise equity amounted to EURk 3,295 and
were deducted from capital reserves.
Retained earnings including Group net profit/loss contain the accumulated results, as well as the
earnings-neutral impact from the increase in the share of interest in the subsidiary MAGNAT Investment
I B.V in prior periods.
The reserves for treasury shares resulted from the reverse acquisition from prior years.
Currency translation reserves include currency differences from fully consolidated companies and
companies accounted for using the equity method whose functional currency is not the euro. The
EURk 3,291 change resulted primarily from the sale of the sale of OXELTON and the two Ukrainian
companies Polartrade Ltd. and Kappatrade Ltd. The currency translation differences related to the sold
entities that were reported in prior years within other comprehensive income (OCI) were recognised
through profit or loss under IAS 21.48 as a result of the sale.
» Notes to the consolidated statement of cash flows | Notes to the consolidated statement of changes in equity
Capital transactions with shareholders
There were no distributions to shareholders either in the year under review or in the subsequent year
up until the date of the preparation of these financial statements.
Changes in equity recognised in other comprehensive income
The sum of other comprehensive income of EURk 3,408 is derived from currency translation differences
derecognised through profit or loss.
The net profit for the period attributable to parent company shareholders amounted to EURk 28,117.
An amount of EURk 756 is attributable to non-controlling shareholders.
2. Notes to the consolidated statement of changes in equity for the period
April 1, 2014 to December 31, 2014
In the reporting year, subscribed capital rose by EURk 411 as a result of the conversion of 2013/18
convertible bonds. We refer to Note E. 4.
Capital reserves represent the amount received through a capital increase against contribution in
kind and the difference in subscribed capital to the sum of the share capital of the economic parent
company and the acquisition cost for the acquisition of DEMIRE AG. As a result of the change in the terms
and conditions of the convertible bond with effect from September 30, 2014, at the initial recognition
of the new debt instrument, an amount of EURk 493 was recognised as an equity component directly
in equity, including the corresponding deferred tax liabilities of EURk 177. In addition, an amount of
EURk 111 was recognised within capital reserves, representing the difference between the nominal
value and carrying amount of convertible bonds.
Retained earnings including Group net profit/loss contain the accumulated results. In prior period,
retained earnings also included the neutral impact on profits from the increase in the interest in the
subsidiary MAGNAT Investment I B.V.
The reserves for treasury shares resulted from the reverse acquisition (see Note A.5).
Currency translation reserves include currency differences from fully consolidated companies and
companies accounted for using the equity method whose functional currency is not the euro.
Capital transactions with shareholders
There were no distributions to shareholders either in the year under review or in the subsequent year
up until the date of the preparation of these financial statements.
Changes in equity recognised in other comprehensive income
Additional changes in other comprehensive income totalling EURk 641 resulted from negative currency
translation differences and the transfer of earnings-neutral changes in equity from investments
accounted for using the equity method.
187
188
The net profit for the period attributable to parent company shareholders amounted to EURk 43,302.
An amount of EURk 2,405 is attributable to non-controlling shareholders.
H. Group segment reporting
The segmentation of the data in the annual financial statements is based on the internal alignment
according to strategic business segments and geographic considerations pursuant to IFRS 8
“Operating Segments”. The segment information provided represents the information to be reported
to DEMIRE’s Executive Board.
The Group is divided into the business segments Investments, Core Portfolio, Fair Value REIT-AG and
Central Functions/Others. The Investments segment contains all information relating to non-current
assets and the activities of the respective project holdings.
The Core Portfolio segment contains the German commercial real estate recognised within the
subsidiaries held or being developed to generate rental income and/or for the purpose of value
appreciation. The Central Functions/Others segment mainly contains DEMIRE AG’s activities in its
function as the Group holding and does not represent an independent business segment.
Since fiscal year 2015, the Asset Management division, which had provided third-party services
until September 2013 under the business model of the predecessor company, is no longer reported
separately. Trailing income and expenses and residual segment assets and liabilities from the
Austrian subsidiaries are reported under the segment Corporate Functions/Others. The Investments
segment contains all information relating to non-current assets as well as the business areas of
revitalisation, project development and land banking. The Investments segment also includes the
activities of the respective project holdings. In line with the management approach, Fair Value REIT
is shown as a separate segment as at December 31, 2015.
During the reporting period, the allocation of Group companies to business segments has changed
to the extent that DEMIRE Worms Objektgesellschaft GmbH is contained under the Core Portfolio
segment as of June 30, 2015. The proportionate segment revenue of EURk 179 generated by DEMIRE
Worms Objektgesellschaft GmbH in the period from January 1, 2015 to June 30, 2015 was allocated
to the Investments segment.
The new segment “Fair Value REIT” contains the activities of Fair Value REIT-AG and its subsidiaries
focused on office and retail properties in regional centres in Germany that were acquired at the end
of 2015. Fair Value REIT can be defined as a segment under IFRS 8.5, since the responsible governing
body in terms of making decisions about the allocation of resources to this segment has not changed
and separate financial information continues to be available for this segment.
189
» Notes to the consolidated statement of changes in equity | Group segment reporting
January 1, 2015 December 31, 2015
Segments by business areas
Investments
Core
Portfolio
Fair Value
REIT
Central
Functions/
Others
Group
2,572
44,863
0
0
47,435
0
18,471
0
0
18,471
174
1,811
0
588
2,573
0
33,217
0
33,217
1,861
0
1,469
3,330
Segment revenues
4,607
98,362
2,057
105,026
Net assets from sold real estate companies
-1,421
-86
0
0
-1,507
-192
-1,650
0
0
-1,842
Other expenses
-3,244
-26,383
0
-9,480
-39,107
Losses from investments accounted for using the
equity method
-3,769
0
0
-61
-3,830
Segment expenses
-8,626
-28,119
-9,541
-46,286
EBIT
-4,019
70,243
-7,484
58,740
171
281
0
1,693
2,145
-1,980
-13,483
0
-12,410
-27,873
0
EURk
Revenues
Profit/loss from fair value adjustments in investment
properties
Other income
Profits originating froma a purchase below market value
Profits from investments accounted for using the
equity method
Expenses on real estate sales
Financial income
Financial expenses
Income taxes
68
-4,576
-5,760
52,465
Significant non-cash items
4,165
-51,628
Impairment losses in net profit/loss for the period
1,435
792
5,319
651,165
116
0
0
83
0
369
-4,139
-17,832
28,873
0
2,825
-44,638
0
619
2,846
337,261
39,200
1,032,945
0
3,020
3,136
0
0
553
553
5,011
0
20,926
26,020
Additional information
Segment assets
of which investments accounted for using the equity
method
of which loans to investments accounted for using
the equity method
of which financial receivables and other financial
assets
of which tax refund claims
3
101
22
45
171
of which assets available for sales in investments
0
1,255
11,750
0
13,005
282
414,896
217,803
135,062
768,043
0
348,870
187,738
134,424
671,032
107
23,236
18,531
4,569
46,443
0
3,801
0
0
3,801
Segment liabilities
of which non-current financial debt
of which current financial debt
of which tax liabilities
190
Geographic segments
D / A / NL
1
CEE / SEE1
CIS1
Group
Revenues
47,435
0
0
47,4352
Other income
35,789
0
0
35,789
3,330
0
0
3,330
18,471
0
0
18,471
105,025
0
0
105,025
1,027,587
2,126
3,232
1,032,945
3,136
0
0
3,136
533
0
0
533
25,937
0
83
26,020
169
0
2
171
13,005
0
0
13,005
767,808
38
197
768,043
608,796
0
0
608,796
EURk
Profits from investments accounted for using the equity
method
propertiesien
Segment revenues
Segment assets
method
the equity method
assets
Total liabilities
1
CEE = Central & Eastern Europe; SEE = South - Eastern Europe; CIS = Commonwealth of Independent States
D / A / NL = Germany, Austria and the Netherlands
2
Revenue is comprised of rental income and revenue from the sale of real estate companies
» Group segment reporting
April 1, 2014 December 31, 2014
Segments by business areas
Core
Portfolio
Central
Functions
1,290
3,527
3,714
8,531
0
63,608
0
63,608
Other income
359
187
191
737
Profits from investments accounted for using the equity method
199
0
0
199
Segment revenues
1,848
67,322
3,905
73,075
Net assets from sold real estate companies
-1,180
0
-3,533
-4,713
0
0
0
0
-5,513
-3,419
217
-8,715
Investments
EURk
Revenues
Profit/loss from fair value ad-justments in investment properties
Expenses on real estate sales
Other expenses
Group
Losses from investments accounted for using the equity method
-1,087
0
-126
-1,213
Segment expenses
-7,780
-3,419
-3,442
-14,641
EBIT
-5,932
63,903
463
58,434
282
0
6,673
6,955
-562
-1,190
-8,141
-9,893
Financial income
Financial expenses
Income taxes
Significant non-cash items
Impairment losses in net profit/loss for the period
-70
-9,482
-238
-9,789
-6,282
53,231
-1,243
45,707
1,390
73,397
-2,144
72,643
257
436
0
693
Segment assets
15,454
353,897
3,661
373,012
method
2,469
0
144
2,613
of which loans to investments accounted for using the
equity method
2,857
0
0
2,857
of which financial receivables and other financial assets
64
0
857
921
3
82
40
125
of which assets available for sales in investments accounted
for using the equity method
0
0
0
0
8,719
244,137
65,527
318,383
Segment liabilities
of which current financial debt
of which tax liabilities
20
190,773
57,299
248,092
8,278
36,271
3,024
47,573
0
105
209
314
191
192
Geographic segments
D / A / NL
1
CEE / SEE1
CIS1
Group
8,206
0
325
8,5312
Other income
825
13
-101
737
method
199
0
0
199
properties
63,608
0
0
63,608
Segment revenues
72,838
13
224
73,075
367,941
1,626
3,445
373,012
method
2,613
0
0
2,613
the equity method
2,857
0
0
2,857
assets
892
0
29
921
123
0
3
126
0
0
0
0
306,231
8,470
3,682
318,383
248,072
0
20
248,092
EURk
Revenues
Segment assets
Total liabilities
1
CEE = Central & Eastern Europe; SEE = South - Eastern Europe; CIS = Commonwealth of Independent States
D / A / NL = Germany, Austria and the Netherlands
2
Revenue is comprised of rental income and revenue from the sale of real estate companies
EURk
Geographic segments – additional information
about Germany1
D
Revenues
45,676
Other income
36,077
properties
18,471
method
Segment revenues
2,098
102,322
Segment assets
method
assets
Total liabilities
1
Allocation by location of property
1,025,645
680
25,925
145
766,752
608,796
» Group segment reporting
Geographic segments – additional information
about Germany1
EURk
Revenues
Other income
properties
method
Segment revenues
D
7,463
759
63,608
0
71,830
Segment assets
method
144
assets
853
105
Total liabilities
1
363,149
311,920
248,072
Allocation by location of property
Revenues for the fiscal year resulted from the rental of real estate companies contained in the
Investments and Core Portfolio segments.
In the Core Portfolio segment, two customers accounted for more than 10 % of the segment’s revenue
each, representing combined revenues of EURk 9,796 in the reporting year.
The Core Portfolio segment contains investment properties and has the task of developing real estate
projects in Germany. The primary aim with respect to these properties is their sustainable management.
The properties are held to generate rental income and/or for value appreciation.
The activities of the companies in the non-operating areas of Central Functions/Others are mainly
limited to the activities of DEMIRE AG.
Of the carrying amounts of the companies accounted for using the equity method (EURk 3,136; previous
year: EURk 2,613), an amount to EURk 116 is allocated to the Investments segment and EURk 3,020 is
allocated to Central Functions/Others.
The investments held for sale accounted for using the equity method were sold during the fiscal year.
As at December 31, 2014, they were allocated to the Investments segment in their entirety.
In the Core Portfolio segment, non-cash items mainly include fair value adjustments to investment
properties of EURk 18,471 (previous year: EURk 63,608) and income taxes of EURk 4,576 (previous
year: EURk 9,789). In the Investments segment, non-cash items include profits from the sale of real
estate companies of EURk 803 (previous year: EURk 69), the result of companies accounted for using
the equity method of EURk 1,908 (previous year: EURk 1,014) and value adjustments in real estate
193
194
inventory of EURk 0 (previous year: EURk 307). Non-cash items in the Central Functions/Others segment
include changes in provisions of EURk 4,462 (previous year: EURk 2,290) and other non-cash items of
EURk 1,380 (previous year: EURk 146).
Of total Group revenues of EURk 47,435 previous year: EURk 8,531), a total of EURk 45,676 (previous
year: EURk 7,463) was generated in Germany. These revenues resulted from income from the rental of
real estate (EURk 43,344) and revenues from the sale of real estate (EURk 2,098).
The geographical allocation of revenues is based on the location of the rented property in the case of
rental income and the location of the object sold for the sale of real estate.
Transactions between segments are carried out on the basis of comparable external conditions.
I. Other disclosures
1. Financial instruments
Interest rate risk to cash flows relates to cash held in deposit accounts and also relates to variable
interest rates on debt. The Company does not anticipate significant negative interest rate effects
over the long term since the level of liquid funds on the balance sheet date are only available until
investments are made and will be subsequently tied up in projects according to plan.
Generally, reference is made to the risk report in DEMIRE’s group management report.
Financial risk management
The Executive Board regularly monitors and actively manages the credit risks which are inherent in the
Group’s operating activities and the risks related to the Group’s financing activities. As a result of these
measures, the consolidated financial statements were prepared on the assumption of a going concern.
The Group’s financial assets mainly consist of interests and loans to companies accounted for using the
equity method, other loans, trade accounts receivable and other receivables, financial receivables and
other financial assets, as well as bank deposits. The majority of trade accounts receivable consists of
rent receivables. Potential defaults in this context are taken into consideration.
The Group’s financial liabilities comprise mainly bonds, bank loans, other loans, overdrafts and trade
accounts payable. The main purpose of these financial liabilities is to finance the Group’s operations.
The Group is exposed to various financial risks as a result of its business activities: foreign currency risk,
interest rate risk, credit risk, and liquidity risk. The overarching risk management system concentrates
on the continual identification and active management of typical business risks. This system accepts
risks within a certain range if they offer the opportunity for commensurate returns. The goal is to limit
the exposure to peak risks so that the Company’s continuance is not jeopardised.
» Group segment reporting | Other disclosures
The Executive Board identifies, evaluates, and hedges financial risks in close collaboration with the
asset manager and in coordination with the Group’s Supervisory Board.
Loan agreements exist in the Group that contain financial covenants stipulated by the banks. Noncompliance with these financial covenants could lead to extraordinary terminations of these agreements
by the banks. The financial covenants concern financial ratios of the respective real estate portfolio,
particularly the debt service cover ratio (DSCR), the interest cover ratio (ICR) and the loan-to-value (LTV)
debt ratio. The calculations are based on the specifications set by the creditors in the loan agreement.
The monitoring, compliance and reporting of the financial covenants specified in the loan agreements
for the properties financed is carried out by DEMIRE’s management, treasury and asset management
areas. Depending on the type of financing, the financial covenants are reported to the creditors on a
quarterly, semi-annual or annual basis, or the creditors are provided with the underlying economic
ratios. Should DEMIRE fail to comply with the financial covenants, the creditors would be entitled to
demand additional guarantees from the debtor. In that case, the loans would be in default. If the
default persisted for a longer period of time and could not permanently be resolved, the creditors have
a special right of termination. DEMIRE complied with all financial covenants for real estate financing as
of the balance sheet date and, therefore, there was no default.
Foreign currency risk
There is no foreign currency risk for the existing portfolio of commercial real estate in Germany because
all transactions are conducted in euros.
The existing investments outside of Germany are subject to translation risk until the point of their
complete disposal.
Any change in the project’s existing assets and liabilities has an effect on the currency translation
reserve within other comprehensive income. When foreign assets are sold, there is a risk that the
accumulated translation differences within the currency translation reserves, which have previously
been recognised under other comprehensive income, will need to be recognised through profit or loss
in the period of the assets’ disposal. If the Group’s liabilities or receivables are maintained in a foreign
currency, there will be an effect in the consolidated income statement.
Projects in Eastern Europe and the Black Sea Region are handled in the same currency when possible
and feasible. Hedging of low levels of residual exchange rate risk, which is essentially limited to the
equity invested and the profit potential, occurs only in isolated cases. Generally, preference is given
to hedging on an aggregated basis rather than on the basis of individual project-related risks. Hedging
is only considered when certain fluctuation ranges have been exceeded for certain currencies and
is limited to the equity invested (and not for the potential profit). In summary, the management of
exchange rate risks is geared towards accepting currency risk within a certain range. The foreign
currency hedging strategy is determined in close coordination with the Supervisory Board.
195
196
The following table shows the breakdown of assets and liabilities by currency (EURk):
EURk
Others
Total
3,136
0
3,136
915,089
0
915,089
553
0
553
14,270
117
14,387
25,925
95
26,020
28,455
12
28,467
Investments held for sale accounted for using the equity method
13,005
0
13,005
Other assets
Other liabilities
April 1, 2014 –
December 31, 2014
28,855
3,433
32,288
1,029,288
3,657
1,032,945
671,032
0
671,032
46,336
107
46,443
50,444
124
50,568
767,812
231
768,043
EURk
Others
Total
2,613
0
2,613
333,070
0
333,070
2,857
0
2,857
9,161
126
9,287
Other assets
Other liabilities
892
29
921
4,379
18
4,397
14,969
4,898
19,867
367,941
5,071
373,012
248,072
20
248,092
47,499
74
47,573
19,117
3,600
22,717
314,688
3,694
318,382
» Other disclosures
A change in the exchange rate of +/– 10 % changes the value of the assets and liabilities as follows:
31/12/2015
+ 10 %
31/12/2015
- 10 %
31/12/2014
+ 10 %
31/12/2014
- 10 %
-152
186
-115
141
-1
2
0
0
-127
155
-123
150
-18
22
-28
34
-10
13
-190
232
0
0
-300
367
-41
50
-32
40
-2
2
-7
9
RON (Romania) in EURk
Assets
Liabilities
GEL (Georgia) in EURk
Assets
Liabilities
UAH (Ukraine) in EURk
Assets
Liabilities
BGN (Bulgaria) in EURk
Assets
Liabilities
Interest rate risk
To finance its German commercial real estate, the DEMIRE Group uses debt in a degree customary for
the industry consisting of both variable and fixed-interest loans as well as tradeable instruments that
contain options for conversion into shares of the Company or Fair Value REIT-AG.¬
The activities of DEMIRE group companies are exposed mainly to financial risks from changes in interest
rates. Therefore, DEMIRE also uses derivative financial instruments to manage its interest rate risks.
Interest rate swaps are used to minimise interest rate risk when interest rates are rising.
At the balance sheet date, interest rate hedges existed in the form of purchased interest rate derivatives
with a nominal volume of EURk 36,149 (previous year: EURk 0), which were acquired in the course of
purchasing real estate companies:
EURk
Interest rate swaps
Nominal volume
Market values
2015
2014
2015
2014
36,149
0
-829
0
In subsequent years, the following net payment obligations for the Company originated from the
interest rate swaps based on the measurement as at the balance sheet date: an amount of EURk 386
has a term of up to one year, an amount of EURk 438 has a term between one and five years and an
amount of EURk 15 has a term of over five years.
197
198
All derivative financial instruments purchased in the reporting year are not designated in a hedging
relationship.
The DEMIRE Group utilises debt to finance its real estate projects sometimes at variable interest rates.
As a consequence, the DEMIRE Group is exposed to interest rate risk since increases in the interest rate
level increases its financing costs. The following table assumes an increase in the interest rate level
of +100 and -100 basis points. Assuming all other parameters remained unchanged, an increase or
decrease of the Company’s interest expenses would lead to the following interest expenses:
Interest rate sensitivity analysis
EURk
31/12/2015
31/12/2014
137
316
Increase in interest expenses assuming a fictitious increase in
variable interest rates by 100 basis points
69
464
Decrease in interest expenses assuming a fictitious decrease in
variable interest rates by 100 basis points
-69
-135
Interest expense from loans with variable interest rates
In this fictitious example, a change in interest expenses would have a direct effect on the Group’s
consolidated profit/loss and Group equity net of related income tax effects.
The majority of the remaining investments in Eastern Europe and the Black Sea Region are financed by
equity. Any financing taken for these investments is recognised at the project level.
Because low interest rates prompt a rise in real estate transaction prices, the level of interest rates also
effects the purchase prices of newly acquired properties. Interest rate levels also play a significant role
in valuing investment properties.
The Executive Board evaluates its interest rate policy on a regular basis and in close collaboration with
the Supervisory Board.
Credit risk
The reported financial instruments represent the maximum credit and default risk. In the context of
Group-wide uniform risk management standards, counterparty risk is assessed and supervised on a
uniform basis. The aim is to minimise default risk. No insurance is taken out for counterparty risk.
There is generally no significant concentration of credit risk within the Group. An analysis of impaired
receivables is provided in the following table:
31/12/2015
EURk
Gross receivables
Impairment
Total
18,255
-3,868
14,387
26,611
-591
26,020
44,866
-4,459
40,407
Gross receivables
Impairment
Total
11,731
-2,444
9,287
4,100
-3,179
921
15,831
-5,623
10,208
31/12/2014
EURk
Overdue receivables are subject to impairment based on the status of the information available. It
is assumed that the receivables not overdue or impaired have retained their value and are therefore
collectable. This assumption is subject to ongoing monitoring.
Liquidity risk
During the Company’s initial phase, liquidity risk was primarily managed by keeping liquidity reserves in
the form of bank deposits available at all times and, to a limited degree, credit lines that could be drawn
down. Today, the liquidity position is significantly more dependent upon proceeds from disposals and
the planned prolongation of loans as they come due. The liquidity position is also affected by additional
contributions for the continued financing of projects. Generally, there are no significant concentrations
of liquidity risk.
Further information on risk management and financial risks are provided in the risk report contained
in the management report.
Capital management and control
The overriding objective of the Group’s capital management is to secure the capability of future debt
repayment and to preserve the Group’s financial net worth. The Group’s capital structure is managed
according to economic and regulatory guidelines. On the part of DEMIRE, capital management
is carried out by way of dividend payments and/or financing. DEMIRE strives to maintain a capital
structure that is suitable for the risk inherent in its business and also subjects itself to the minimum
capital requirements prescribed by the German Stock Corporation Act. The Executive Board of DEMIRE
is monitoring its compliance. These requirements were met both in the reporting year and in the
previous year. DEMIRE also strives to have a balanced maturity structure for its outstanding liabilities.
The intention of the Executive Board is to obtain a sufficiently strong equity base and maintain the
199
200
confidence of investors and the market. Whereas the equity commitment in Germany stands at 20 %
to 30 % of the investment volume, significantly higher equity commitments must be allowed for in the
CEE/SEE/CIS countries, especially during the early stages.
The Group monitors its capital through its equity ratio, which is also an important key ratio for investors,
analysts, and banks. Components of this ratio are the total assets in the consolidated balance sheet
and the shareholders’ equity reported in the consolidated balance sheet that is attributable to both
the parent company shareholders and non-controlling shareholders. DEMIRE intends to utilise the
available equity as a means of possible leverage but will continue to maintain a solid equity ratio. As
at December 31, 2015, the equity ratio was 25.6 % (December 31, 2014: 14.6 %). DEMIRE continues to
strive for an equity ratio of more than 40 %. This goal will be achieved through different processes.
Disposals should be carried out at least at the higher of the carrying amount and market value.
Additional information on financial instruments
The classification of financial instruments under IFRS 7 corresponds to the respective consolidated
balance sheet items. The following table contains the carrying amounts, amounts recognised and the
fair values of financial assets and liabilities for each category of financial instruments and reconciles
these values to the measurement categories of IAS 39 at the balance sheet date and the prior year.
The key measurement categories for DEMIRE in accordance with IAS 39 are Available-for-Sale Financial
Assets (Afs), Loans and Receivables (LaR), Amortised Cost (AmC) and Held for Trading (HfT).
DeCember 31, 2015
EURk
IAS 39 measurement
Measurement
category
Carrying
amount
Fair value
through
profit/loss
Amortised
cost
Fair value
as
comparative
information
Interests in investments accounted for using the
equity
n/a
3,136
0
3,136
3,136
LaR
11,045
0
11,045
11,045
Loans to investments accounted for using the
equity method
LaR
553
0
553
553
Other loans
LaR
384
0
384
384
LaR
14,387
0
14,387
14,387
LaR/HfT
26,020
2,205
23,815
26,020
LaR
28,467
0
28,467
28,467
Convertible bond
AmC
19,491
0
19,491
56,947
Bonds
AmC
97,719
0
97,719
94,000
A-/B-Notes (Germavest)
AmC
92,651
0
Financial liabilities (Fair Value REIT)
AmC
144,113
Other non-current financial debt
AmC
317,058
0
Interest rate swaps
92,651
92,651
144,113
143,620
317,058
316,565
HfT
829
829
0
829
Trade payables
AmC
19,887
0
19,887
19,887
AmC
46,443
0
46,443
46,443
LaR
80,856
2,205
78,651
80,856
AmC
500,598
0
500,598
533,842
AtFVtPL
92,651
0
92,651
92,651
Amount per measurement category
Afs: Available-for-Sale Financial Assets;
LaR: Loans and Receivables;
AmC: Amortised Cost (financial liabilities recognised at amortised cost);
HfT: Held for Trading (financial assets held for trading);
AtFVtPL: At Fair Value through Profit or Loss; n.a.: not applicable
201
202
December 31, 2014
EURk
IAS 39 measurement
Measurement
category
Carrying
amount
Fair value
through
profit/loss
Amortised
cost
Fair value
as
comparative
information
n/a
2,613
0
2,613
4,001
Interests in investments accounted for using the
equity method
LaR
14
0
14
14
Loans to investments accounted for using the
equity method
LaR
2,857
0
2,857
4,050
Other loans
LaR
322
0
322
322
LaR
9,287
0
9,287
9,287
LaR
921
0
921
1,246
LaR
4,397
0
4,397
4,397
Convertible bond
AmC
8,173
0
8,173
15,244
Bonds
AmC
49,138
0
49,138
50,100
Other non-current financial debt
AmC
188,530
0
188,530
193,330
Trade payables
AmC
11,519
0
11,519
11,519
Other current financial debt
AmC
47,573
0
47,573
47,573
LaR
17,798
0
17,798
19,316
AmC
304,933
0
304,933
317,766
Amount per measurement category
Afs: Available-for-Sale Financial Assets;
LaR: Loans and Receivables;
AmC: Amortised Cost (financial liabilities recognised at amortised cost);
n.a.: not applicable
Due to the short-term maturity of cash and cash equivalents, trade accounts receivable and payable,
and other current receivables and liabilities, it is assumed that their respective fair values correspond
to the carrying amounts.
It is assumed that the respective fair value of trade accounts receivable and other receivables, other
current financial assets and liabilities as well as cash and cash equivalents, equals their carrying
amounts due to their short-term nature.
The following table presents the measurement hierarchy, measurement procedure and material input
factors for the fair values of each category of financial assets and liabilities.
Type
Hierarchy
Measurement procedure and material input factors
Level 3
Expected future free cash flows of a project by applying a market-based, property-specific discount rate
Interests in investments accounted for
using the equity method
Level 3
Discounted cash flows from the continued use of an asset on
the basis of yield curves observable on the market at the reporting date
Loans to investments accounted for
using the equity method (fixed-rate)
Level 3
Discounted cash flows on the basis of yield curves observable
on the market at the reporting date
Financial receivables and other financial
assets
Level 3
Level 3
Derivatives
Level 2
Interest rate curves, credit spreads, indices
Quoted convertible bonds
Level 1
Quoted bid prices on active markets
Quoted corporate bonds
Level 1
Quoted bid prices on active markets
According to IFRS 7.29, it is assumed that all current financial instruments’ carrying amounts correspond
to their fair value. Since the predominant portion of non-current loans was drawn down shortly before
the balance sheet date, it is assumed that the fair values do not materially differ from the carrying
amounts.
The carrying amounts of the financial instruments represent the maximum default risk:
EURk
31/12/2015
31/12/2014
Loans and receivables
41,344
13,387
28,467
4,397
11,032
14
TOTAL
80,843
17,798
The maximum default risk of loans and receivables is divided according to regional considerations as
follows:
EURk
31/12/2015
31/12/2014
37,286
7,658
Poland
1,567
1,737
Ukraine
2,346
1,125
Georgia
0
12
Germany, Austria and the Netherlands
Other countries
TOTAL
145
2,855
41,344
13,387
203
204
The Group’s cash and cash equivalents are divided according to regional considerations as follows:
EURk
31/12/2015
31/12/2014
28,455
4,378
Cash and cash equivalents in euro countries
Cash and cash equivalents in other countries
TOTAL
12
19
28,467
4,397
As of December 31, 2015, there were no overdue loans and receivables after consideration of
impairments. In the prior year, there were no overdue loans and receivables.
Net gains and losses
(EURk)
From subsequent measurement
from
interest
01/01/2015 – 31/12/2015
Loans and Receivables
AmC
HfT
Total
Net gains and losses
(EURk)
AmC
Total
Currency
difference
Impairment
Reversal of
impairment
Net gain/
loss
486
0
4
-3,388
343
-2,555
-112
0
0
0
0
-112
0
1,316
0
0
0
1,316
374
1,316
4
-3,388
343
-1,351
From subsequent measurement
from
interest
at fair value
profit or
loss
Currency
difference
Impairment
Reversal of
impairment
Net gain/
loss
555
0
-189
-693
19
-308
-520
0
0
0
0
-520
35
0
-189
-693
19
-828
01/04/2014 – 31/12/2015
at fair value
profit or
loss
Impairment losses during the reporting period are distributed among the classes of financial
instruments as follows:
EURk
31/12/2015
31/12/2014
2,846
693
Total
2,846
693
Future outgoing payments related to interest payments and repayments of the principal amount of
financial debt are presented in the following table:
EURk
2016
2017
2018
2019
2020
after
31/12/2020
2014/2019 corporate bond,
Interest
6,422
6,422
6,422
Repayment
4,816
85,625
2013/2018 convertible bond,
Interest
640
640
Repayment
640
10,662
2015/2018 mandatory convertible bond,
Interest
Repayment
413
413
172
3,040
3,040
3,040
Signal Capital loan,
Interest
Repayment
35,200
Promissory note Deutsche Bank,
Interest
7,367
7,310
7,273
7,236
740
740
740
145,001
Interest
591
572
552
45
Repayment
853
872
892
24,064
Interest
133
129
125
31
Repayment
201
196
190
6,207
4,170
174
Repayment
LBBW loan A,
DEMIRE Commercial Real Estate GmbH
LBBW loan,
HFS bond,
Interest
Repayment
27,800
IBB amortising loan,
DEMIRE Real Estate München I GmbH
Interest
Repayment
247
8,225
DKB loan,
Objektgesellschaft Worms GmbH
Interest
Repayment
36
2,400
LBB amortising loan,
Hanse-Center Objektgesellschaft mbH
Interest
Repayment
151
4,034
205
206
Teur
2016
2017
2018
2019
2020
after
31/12/2020
HypoNoe loan,
Interest
338
324
311
297
283
Repayment
460
460
460
460
9,430
Interest
715
693
671
650
314
Repayment
900
900
900
900
26,175
Interest
145
136
128
119
110
418
Repayment
254
262
271
280
289
3,215
2,151
2,151
2,151
2,151
2,151
25,806
DG Hyp loan, Logistikpark Leipzig GmbH
Volksbank Mittweida loan,
A-Notes, Germavest Real Estate S.a.r.l.
Interest
Repayment
55,000
B-Notes, Germavest Real Estate S.a.r.l.
Interest
2,194
1,745
1,268
760
317
22
Repayment
8,262
8,811
9,376
9,967
6,929
2,568
Interest
237
227
217
103
Repayment
400
400
400
8,100
66
64
61
29
192
192
192
4,630
Westdeutsche ImmobilienBank,
Fair Value REIT-AG
Westdeutsche ImmobilienBank,
Fair Value REIT-AG
Interest
Repayment
Westdeutsche ImmobilienBank
Fair Value REIT-AG
Interest
28
25
22
14
240
240
240
1,490
Interest
42
41
40
39
37
Repayment
80
78
76
74
71
Repayment
Stadt-Sparkasse Langenfeld amortising loan,
Fair Value REIT-AG
Convertible bond, Fair Value REIT-AG
Interest
Repayment
20
8,714
Bayerische Beamten Lebensversicherung a.G.
amortising loan, BBV 02
Interest
Repayment
3
139
Interest
Repayment
21
823
Interest
Repayment
3
119
2,339
Teur
2016
2017
2018
2019
2020
after
31/12/2020
UniCredit Bank AG, BBV 08
Interest
Repayment
66
59
52
45
37
230
244
259
276
293
980
Interest
Repayment
473
433
392
348
301
1,348
1,432
1,522
1,618
1,720
453
435
418
402
113
1,300
1,200
1,200
1,200
27,924
8,656
Deutsche Genossenschafts-Hypothekenbank,
Interest
Repayment
Interest
482
459
436
413
390
92
1,172
1,172
1,172
1,172
1,172
18,628
Interest
36
34
32
30
28
6
Repayment
97
97
97
97
97
1,249
Interest
150
143
137
130
124
29
Repayment
317
317
317
317
317
5,714
Repayment
Interest
Repayment
818
770
720
667
613
556
1,241
1,290
1,341
1,394
1,449
14,266
Westdeutsche Immobilienbank amortising
loan, Fair Value REIT-AG
Interest
Repayment
66
1,908
Sparkasse Südholstein amortising loan, IC 15
Interest
203
197
191
184
179
17
Repayment
221
227
234
240
247
6,321
73,566
91,212
311,621
19,887
Total
96,264
81,110
145,882
It is assumed that no conversions of the 2013/2018 convertible bonds and 2015/18 mandatory
convertible bonds will take place before maturity.
Other financial obligations as at December 31, 2015, in the amount of approx. EURk 12,200 resulted
from real estate purchase agreements concluded in the 2015 reporting period that have not closed as
at the balance sheet date.
207
208
2. Disclosures regarding related companies and persons
Related companies and persons
Companies and persons are considered to be related if they have the ability to control DEMIRE and its
subsidiaries or exercise significant influence over their financial and operating policies. The existing
control relationships were taken into account to determine the degree of significant influence that
related companies and persons have on the Company’s financial and operating policies.
The group of related companies includes the fully consolidated subsidiaries and the joint ventures
and associated companies accounted for using the equity method.
Moreover, due to their significant influence, the following key personnel of the parent company are
considered to be related persons as defined by IAS 24:
■
Members of DEMIRE’s Executive Board (see Note I.4.a.) and their close relatives,
■
Members of DEMIRE’s Supervisory Board (see Note I.4.b.) and their close relatives.
Legal transactions with related companies and persons
In the fiscal year under review, transactions with related parties were exclusively carried out at
customary market conditions.
The transactions, revenues and rendering of services between the parent company and its subsidiaries
were settled in the same manner as those between unrelated parties and eliminated in the context
of consolidation. Therefore, they are not explained in the notes.
Business transactions with members of management holding key positions at the Company did
not occur in the reporting period other than the following two business transactions: To acquire an
interest in Logistikpark Leipzig GmbH, DEMIRE increased its share capital by EUR 2,541,149 against
contribution in kind. M1 Beteiligungs GmbH, Berlin, was admitted to subscribe to the new shares
in return for a contribution in kind consisting of a 94 % interest in Logistikpark Leipzig GmbH. In
addition to the shares, a cash component of roughly EUR 18.6 million was also agreed to as part of the
purchase price. In the context of the capital increase, each new DEMIRE share was assigned a value
of EUR 5.84, resulting in a calculated total purchase price of EURk 33,173. One Supervisory Board
member holds an indirect interest in M1 Beteiligungs GmbH, which, in turn, holds a non-controlling
interest in DEMIRE. One DEMIRE Supervisory Board member holds an interest in a company that
provided asset management services for DEMIRE’s foreign properties during the reporting year and
invoiced a total of EURk 113.
As far as other transactions with members in key positions, reference is made to the discussion on
the remuneration of the Executive Board in Note I.4.a.
The following balances exist with respect to associated companies:
EURk
31/12/2015
31/12/2014
116
48
0
146
0
12
With respect to financial receivables and other financial assets, reference is made to Note E.2.3. Trade
payables and other liabilities concern the rental of office space and were offset in the reporting period
with a loan granted by DEMIRE AG to SQUADRA Erste Immobilien GmbH and, therefore, amounted to
EURk 0. Current financial debt concerns other financial liabilities.
The following balances exist with respect to joint ventures:
EURk
31/12/2015
31/12/2014
553
2.857
480
921
0
385
With regard to loans to investments accounted for using the equity method, reference is made to the
discussion in Note E.1.6. With respect to financial receivables and other financial assets, reference is
made to Note E.2.3. The balance of current financial debt concerns other financial liabilities.
There is no collateral for receivables due from associated companies and joint ventures.
Volume of business transactions with associated companies:
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
68
51
146
10
12
21
209
210
Volume of business transactions with joint ventures:
EURk
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
2,304
308
441
98
385
0
Transactions underlying financial receivables and other financial assets resulted from the repayment
of loans granted. Loans to investments accounted for using the equity method resulted from interest
expenses for loans granted. The item current financial debt includes other financial debt.
3. Auditor’s fee
The auditor’s fee for Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Eschborn/Frankfurt charged
in the fiscal year related to the subgroups DEMIRE and Fair Value REIT consisted of the following (prior
year amounts include value-added taxes):
EURk
Auditing services
01/01/2015 –
31/12/2015
01/04/2014 –
31/12/2014
681
444
Other assurance services
1,740
0
Tax consultation services
0
0
26
0
2,447
444
Other services
Of the fee of EURk 681 for auditing services recognised in the reporting year, an amount of EURk 74
relates to fees for auditing services for the 2014 fiscal year.
Other assurance services include the submission of a comfort letter in the context of a prospectus
related to the acquisition of shares in Fair Value REIT-AG, of which EURk 795 were offset against capital
reserves as costs to raise equity.
4. Executive Board, Supervisory Board and employees
a. Executive Board
In accordance with the Articles of Association, the Executive Board is responsible for managing business
activities.
In the fiscal year under review, the Executive Board consisted of the following members:
■
Herr Hon.-Prof. Andreas Steyer, CEO,
■
Herr Markus Drews, COO.
Mr. Frank Schaich, CFO, who was appointed as a member of the Executive Board on February 1, 2016.
In the 2015 fiscal year, DEMIRE AG recognised variable remuneration in the amount of EURk 313
(previous year: EURk 27), fixed remuneration of EURk 464 (previous year: EURk 196) and share-based
payments of EURk 444 (previous year: EURk 0) for the members of the Executive Board. These amounts
are divided as follows:
EURk
Markus Drews
Executive Board compensation
2015
2014
660
205
561
18
1,221
223
Die Vorstandsbezüge im abgelaufenen Fiscal year setzen sich wie folgt zusammen:
EURk
2015
2014
Short-term benefits
547
223
444
0
Other long-term benefits
Executive Board compensation
230
0
1,221
223
Hon.-Prof. Andreas Steyer receives a time-proportionate entitlement to a multi-year bonus if the
performance period for the determination of the multi-year bonus has existed for at least twenty-four
months.
There were no pension obligations, payments related to termination of employment or postemployment benefits for active and former Executive Board members in the reporting year.
The members of the Executive Board were not granted any loans or advances and no contingencies
were assumed for their benefit.
b. Supervisory Board
The following provides the names, professions and remuneration of the Company’s Supervisory Board
members during the past fiscal year.
Name
Position
Profession
Period
Remuneration
fiscal year
2015
(EURk)*
Remuneration
abbreviated
2014 fiscal year
(EURk)*
Prof. Dr.
Hermann Anton Wagner
Chairman
Independent
auditor and tax
consultant
Since
April 17, 2013
135
30
Dr. Peter Maser
Deputy
Chairman
Attorney at Law
Since
January 12, 2015
90
0
Günther Walcher
Member
Entrepreneur
Since
October 23, 2013
45
10
Dr. Dirk Hoffmann
Deputy
Chairman
Independent
Attorney at Law
Until
December 31, 2014
0
23
270
63
Remuneration of the Supervisory Board
* Compensation excluding reimbursement of expenses and value-added tax
211
212
Supervisory Board members were also reimbursed for travel expenses in the amount of EURk 5
(previous year: EURk 5).
There were no pension obligations or long-term remuneration components owed to active or former
Supervisory Board members as at December 31, 2015.
The members of the Executive Board were not granted any loans or advances and no contingencies
were assumed for their benefit.
c. Employees
The number of employees as at the balance sheet date was as follows:
EURk
Executive Board members
Permanent employees
31/12/2015
31/12/2014
2
2
54
7
56
9
The average number of employees in the 2015 fiscal year was 38 (abbreviated 2014 fiscal year: 6). Of the
54 permanent employees, 15 (11 based on year’s average) were employed by PANACEA Property GmbH
and PRAEDIA GmbH, which are not consolidated for reasons of materiality and which provide asset and
facility management services to DEMIRE Group companies. These newly acquired subsidiaries are of
minor importance for the consolidated financial statements under IFRS and are therefore not included
in the IFRS consolidated financial statements as of December 31, 2015, for reasons of materiality.
d. Share-based payments
With the consent of the Supervisory Board, the Executive Board is authorised until December 31, 2015,
(“issue period”) as detailed in the following provisions under the 2015 stock option plan to issue up
to 1,000,000 stock options with subscription rights for shares of DEMIRE AG with a vesting period of
four years and an exercise period of another five years (“the exercise period”) provided that each stock
option entitles its holder to subscribe for one share of the Company. With regard to the issue of stock
options to members of the Executive Board of the Company, this authorisation is limited only to the
Supervisory Board.
The beneficiaries and the amount of stock options for subscription offered to these beneficiaries
are to be determined by the Executive Board of the Company with the consent of the Supervisory
Board. To the extent members of the Executive Board of the Company are to receive stock options, the
determination and the issue of these options will be governed by the Supervisory Board.
The following amount of stock options may be issued:
■
a total of up to 800,000 stock options (80 %) to members of the Executive Board, and
■
a total of up to 200,000 stock options (20 %) to selected employees of the Company or directors
or employees of Group companies.
The subscription rights arising from the stock options can be exercised for the first time upon the
expiration of the statutory vesting period of four years according to Section 193 para. 2 no. 4 AktG. The
vesting period starts after the issue of the stock options (day of receipt of the beneficiary’s statement
of subscription by the Company or by the credit institution commissioned by the Company for the
settlement).
The relevant exercise price for one share of the Company upon the exercise of the stock options
corresponds to at least 100 % of the basis price. The basis price is the share price of the Company at
the time of the resolution of the Executive Board on the issue of stock option rights and, in the case
of the issue of stock options to members of the Executive Board, at the time of the resolution of the
Supervisory Board. The relevant share price is the average closing price of the Company’s shares in
XETRA trading on the Frankfurt Stock Exchange (or a comparable successor system) on the last ten
stock exchange trading days before the resolution is made on the issue of stock options.
The exercise of the subscription rights is subject to the Company’s share price in XETRA trading on the
Frankfurt Stock Exchange (or a comparable successor system) being at least 10 % higher than the basis
price on the day preceding the exercise of the subscription rights.
The accounting of share-based payments is governed by IFRS 2 “Share-based Payment”. The 2015 stock
option plan is to be classified as “equity-settled share-based payments”. Under IFRS 2, the total staff
costs arising from the stock options are to be distributed over the four-year vesting period starting
from the grant date. In the case of DEMIRE AG, the grant date is the day the approval is given by the
Executive Board and/or Supervisory Board.
The value of compensation based on real stock options according to the Black-Scholes Model is
determined by the fair value of the options at the grant date pursuant to IFRS 2.10. In the case of
DEMIRE AG, the grant date is the day the options were issued (April 7, 2015 and December 9, 2015).
The following vesting conditions are relevant for the accounting of the stock-based compensation
programme:
■The four-year vesting period represents a so-called service condition since only a specified
period of service in the Company must be completed.
■The exercise condition of a closing share price exceeding the basis price by at least 10 % on the
day preceding the exercise is classified as a performance condition since meeting the condition
is based on a performance target. The performance conditions are to be divided into market
conditions and non-market conditions. In the case of DEMIRE AG, the exercise condition is to be
classified a market performance condition as it is explicitly related to the Company’s share price.
Such a market performance condition is reflected in the valuation of the option exclusively by
means of a probability calculation performed at the grant date.
213
214
During the reporting period until the balance sheet date, a total of 1,000,000 stock options were
granted, of which 800,000 stock options were granted in the first tranche to members of the Executive
Board and 160,000 to selected Company and Group company employees. The fair value of each option
from the first tranche was EUR 2.74. In the fourth quarter, a total of 60,000 stock options were newly
issued in a second tranche, net of stock options that were returned by employees who had left the
Company (20,000 stock options). The fair value of each option from the second tranche was EUR 1.99.
The calculation of the option’s fair value as at the date of issue of the first and second tranche was
based on the following parameters:
Calculation parameters
Dividend yield (%)
Expected volatility (%)
1)
Risk-free interest rate (%)
Term of the option (years)
Weighted average share price (EUR)
Option price (EUR)
1st tranche
2nd tranche
0.00
0.00
60.40
46.25
0.50
0.80
9.00
9.00
4.258
3.76
2.74
1.99
1) 180-day historical volatility
Staff costs recognised in the reporting period from the “2015 Stock Option Plan” amounted to EURk 434
and were recognised directly in equity under general and administrative expenses.
5. Subsequent events
The following significant events impacting DEMIRE’s net assets, financial position and results of
operations took place subsequent to the end of the fiscal year:
On January 13, 2016, the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG completed
the acquisition of a 94.9 % stake in Kurfürster Immobilien GmbH, Kassel, which had been signed in
July 2015. The property, located in the centre of Hesse’s third largest city, is predominantly used for
retail purposes and has a total space of approximately 21,000 m². The property also includes one of
Kassel’s largest parking garages with around 600 parking spaces. As the first shopping mall in Kassel in
the year 1991, the commercial property’s contractual net rental income, excluding utilities, amounts
to roughly EUR 3.9 million on an annual basis. Tenants include retail stores, a hotel, casino, offices and
professional practices. This transaction strengthened DEMIRE’s commitment in retail properties – the
Company’s third asset class alongside office and logistics. With the completion of this transaction, all
of the acquisitions and transactions announced in 2015 were completed, including the takeover of Fair
Value REIT-AG.
Based on a purchase agreement dated January 29, 2016, the property located in Tornesch at WillyMeyer-Str. 3-5 was sold by Fair Value REIT. The purchase price of EUR 0.65 million is 10 % higher than
the expert appraised market value as per December 31, 2015 of EUR 0.59 million and was paid in full
on March 16, 2016.
The creditors of the convertible bond issued by Fair Value REIT-AG on January 19, 2015 with a principal
amount of EUR 8.46 million yielding 4.5 % p.a. and maturing as at January 19, 2020 have requested
by declaration on February 9, 2016 and in accordance with the bonds terms and conditions, early
redemption in the amount of 103 % of the nominal value plus accrued interest as of the effective
date (February 19, 2016) as a result of the change of control at Fair Value REIT-AG which occurred
on December 21, 2015. The corresponding amount of around EUR 8.75 million was paid on time on
February 19, 2016. The refinancing of the redemption amount was made through two loans. The loan
issued to Fair Value REIT-AG from CapitalBank - GRAWE Group AG, Graz, is a bullet loan with a term of
three years until February 15, 2019 in the amount of EUR 7.0 million, less a processing fee of 1 %, at a
variable interest rate of 3-month EURIBOR plus a margin of 400 basis points and a minimum interest
of 4.0 % p.a. About 25 % of this loan is secured by mortgages with the remainder secured by pledged
shares and other assets. The loan from Stadt-Sparkasse Langenfeld to Fair Value REIT-AG is a mortgagesecured loan of EUR 2.0 million with a term until March 30, 2020, bearing 1.69 % interest p.a. The loan
is to be redeemed with 3.0 % p.a. plus accrued interest.
Effective February 1, 2016, the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG
appointed Mr. Frank Schaich, sole Executive Board member of Fair Value REIT-AG, as a new member
of the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG for a term of three years until
January 31, 2019. An executive board contract for the duration of his term of office was concluded
with Mr. Schaich under the condition precedent that he terminates his existing employment contract
with Fair Value REIT-AG. On March 1, 2016, the Supervisory Board of Fair Value REIT-AG extended
the current Executive Board term of Mr. Schaich until January 31, 2019 and terminated his existing
employment contract by mutual agreement effective February 29, 2016.
By decision of the District Court, the Executive Board members of DEMIRE AG Hon.-Prof. Andreas
Steyer and Markus Drews were appointed as members of Fair Value REIT-AG’s Supervisory Board
effective March 1, 2016. In the constituent Supervisory Board meeting of Fair Value REIT-AG, Mr. Drews
was elected deputy chairman of the Supervisory Board.
In mid-February 2016, DEMIRE Deutsche Mittelstand Real Estate AG acquired F. Krüger Immobilien
GmbH located in Bremen as part of an asset deal. By way of a business transfer to DEMIRE Immobilien
Management GmbH (DIM), a wholly owned subsidiary of DEMIRE, the in-house property management
activities of the Group were strengthened further. All employees were transferred to DIM and will
continue to work at the new DIM location in Bremen.
With the purchase agreement dated March 4, 2016, a subsidiary of Fair Value REIT sold the nursing
home property in Radevormwald at its carrying amount of EUR 11.1 million. The transfer of ownership,
benefits and obligations took place on March 31, 2016 upon the payment of the purchase price.
In early April 2016, DEMIRE AG concluded a contract with Südwestbank AG for a one-year credit line
until March 30, 2017 in the amount of EUR 5.0 million less a 3 % processing fee at a variable interest
rate of 3-month EURIBOR plus a margin of 250 basis points and a minimum interest rate of 2.5 % p.a.,
which can be utilised at various times and prolonged annually. At the end of April 2016, DEMIRE AG
concluded a contract with Baader Bank AG for a one-year credit line until April 30, 2017 in the amount
of EUR 5.0 million at a fixed interest rate of 5.0 % p.a. that can be drawn upon as needed. This credit
line can be extended annually. In the case of both credit lines, collateral will be provided through
215
216
pledged account balances and interests in subsidiaries upon the credit lines’ utilisation, which has not
yet occurred. These credit lines are expected to be fully exhausted by no later than mid-June 2016 so
that a portion of the HFS bond can be redeemed in a corresponding amount at that time. This will allow
for a reduction in the net interest expense and will strengthen DEMIRE’s profitability.
In the first quarter of 2016, the remaining bonds of a nominal EUR 14.4 million of the 2014/2019
corporate bond were placed with investors.
In 2016, prior to the publication of the consolidated financial statements, a total of 14,937 convertible
bonds was converted into no-par value share of DEMIRE Deutsche Mittelstand Real Estate AG. As at
April 30, 2016, this represented a notional interest in the share capital of roughly 0.03 %.
6. Declaration of Conformity with the “German Corporate Governance Code”
The statement required under Section 161 AktG with regard to the German Corporate Governance
Code is made available by the Company to shareholders once per calendar year. The Declaration of
Conformity with the German Corporate Governance Code was issued on April 29, 2016, and made
permanently available to shareholders on DEMIRE’s website under the section titled “Company”
(http://www.demire.ag/files/demire_ag_entsprechenserklaerung____161_aktg_2015-de.pdf).
On January 26, 2016, the Executive Board and Supervisory Board of Fair Value REIT-AG submitted the
current Declaration of Conformity in accordance with Section 161 AktG. The declaration was made
available to shareholders of Fair Value REIT-AG on the Company’s website at (http://www.fvreit.de/
investor-relations/corporate-governance/entsprechens-erklaerung/entsprechenserklaerung.html).
7. Release for publication
These consolidated financial statements were prepared by the Executive Board on May 13, 2016, and
have been released for publication.
Frankfurt am Main, May 13, 2016
Frank Schaich
Member of the Executive Board
Member of the Executive Board
(CEO)
(COO)
(CFO)
» Other disclosures | Appendix 1: Scope of consolidation
Appendix 1: Scope of consolidation
GROUP COMPANIES
Group’s
interest in
capital
Date of
inception /
acquisition
Acquisition
cost EURk
Fiscal year
Directly held interests:
GERMANY
DEMIRE Deutsche Mittelstand Real
Estate AG, Frankfurt am Main
Parent company
acquired
100.00 % 2
28/10/2009
21,160
01/01/2015
–
31/12/2015
Glockenhofcenter
Objektgesellschaft mbH
Subsidiary
acquired
94.90 % 2
01/02/2015
36
01/01/2015
–
31/12/2015
Hanse-Center
Subsidiary
acquired
94.90 % 2
01/02/2015
790
01/01/2015
–
31/12/2015
Subsidiary
acquired
94.00 % 2
01/07/2015
33,329
01/01/2015
–
31/12/2015
DEMIRE Immobilien Management
GmbH
Subsidiary
acquired
100.00 %
14/01/2015
20
01/01/2015
–
31/12/2015
Panacea Property GmbH
Subsidiary
acquired
51.00 % 3
17/03/2015
13
01/01/2015
–
31/12/2015
Praedia GmbH
Subsidiary
acquired
51.00 % 2
17/03/2015
7
01/01/2015
–
31/12/2015
Fair Value REIT AG
Subsidiary
acquired
77.70 % 2
21/12/2015
21,928
01/01/2015
–
31/12/2015
FVR Beteiligungsgesellschaft
Erste mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Zweite mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Dritte mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Vierte mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Fünfte mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Sechste mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Siebente mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Achte mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
Neunte mbH
Subsidiary
acquired
100.00 %
01/10/2015
25
01/01/2015
–
31/12/2015
217
218
Group Companies
Group’s
interest in
capital
Date of
inception /
acquisition
Acquisition
cost EURk
Fiscal year
UnDirectly held interests:
Germany
SQUADRA Immobilien GmbH &
Co. KGaA
Associated
company
acquired
24.58 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
DEMIRE
Commercial Real Estate GmbH
Subsidiary
acquired
100.00 %
21/10/2008
25
01/01/2015
–
31/12/2015
ZWEI GmbH
Subsidiary
acquired
100.00 %
20/08/2014
25
01/01/2015
–
31/12/2015
DEMIRE CONDOR Properties
Management GmbH
Subsidiary
acquired
100.00 %
17/10/2014
28
01/01/2015
–
31/12/2015
DREI GmbH
Subsidiary
acquired
100.00 %
07/05/2015
25
01/01/2015
–
31/12/2015
VIER GmbH
Subsidiary
acquired
100.00 %
07/05/2015
25
01/01/2015
–
31/12/2015
FÜNF GmbH
Subsidiary
acquired
100.00 %
07/05/2015
25
01/01/2015
–
31/12/2015
SECHS GmbH
Subsidiary
acquired
100.00 %
25
01/01/2015
–
31/12/2015
IC Fonds & Co. Büropark Teltow KG
(„IC 07“)
Subsidiary
acquired
60.74 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
IC Fonds & Co. Gewerbeportfolio
Germany 13. KG („IC 13“)
Subsidiary
acquired
44.58 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
IC Fonds & Co. SchmidtBankPassage KG („IC 12“)
Subsidiary
acquired
41.86 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV Immobilien-Fonds Nr. 14
GmbH & Co. KG („BBV 14“)
Subsidiary
acquired
39.13 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
Subsidiary
acquired
62.20 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV Immobilien-Fonds Nr. 6 GmbH
& Co. KG („BBV 06“)
Subsidiary
acquired
47.98 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV Immobilien-Fonds Nr. 8 GmbH
& Co. KG („BBV 08“)
Subsidiary
acquired
45.08 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
GP Value Management GmbH
(„GPVM“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV 3 Geschäftsführungs-GmbH &
Co. KG („FV03“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
Germany
» Appendix 1: Scope of consolidation
Group Companies
Group’s
interest in
capital
Date of
inception /
acquisition
Acquisition
cost EURk
Fiscal year
Germany
Co. KG („FV06“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
Co. KG („FV09“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV 10 Geschäftsführungs-GmbH
& Co. KG („FV10“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV 14 Geschäftsführungs-GmbH
& Co. KG („FV14“)
Subsidiary
acquired
77.70 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
BBV Immobilien-Fonds Erlangen
GbR („BBV 02“)
Subsidiary
acquired
32.65 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
Subsidiary
acquired
34.54 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
IC Fonds & Co. Gewerbeobjekte
Germany 15. KG („IC 15“)
Subsidiary
acquired
37.46 %
21/12/2015
N/A5
01/01/2015
–
31/12/2015
SQUADRA Erste Immobilien GmbH
Associated
company
acquired
24.58 %1
29/10/2009
N/A4
01/01/2015
–
31/12/2015
SQUADRA Management GmbH
Associated
company
acquired
24.58 %1
29/10/2009
N/A4
01/01/2015
–
31/12/2015
DEMIRE Real Estate München 1
GmbH
Subsidiary
acquired
100.00 %
27/11/2013
27
01/01/2015
–
31/12/2015
CAM Commercial Asset Management EINS GmbH
Subsidiary
acquired
100.00 %
31/12/2014
26,625
01/01/2015
–
31/12/2015
CAM Commercial Asset Management ZWEI GmbH
Subsidiary
acquired
100.00 %
31/12/2014
7,663
01/01/2015
–
31/12/2015
CAM Commercial Asset Management DREI GmbH
Subsidiary
acquired
100.00 %
31/12/2014
9,830
01/01/2015
–
31/12/2015
CAM Commercial Asset Management VIER GmbH
Subsidiary
acquired
100.00 %
31/12/2014
8,139
01/01/2015
–
31/12/2015
Schwerin Margaretenhof 18 GmbH
Subsidiary
acquired
94.90 %
31/12/2014
1,599
01/01/2015
–
31/12/2015
DEMIRE Objektgesellschaft Worms
GmbH
Subsidiary
acquired
94.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Subsidiary
acquired
100.00 %
03/03/2015
468
01/01/2015
–
31/12/2015
Subsidiary
acquired
100.00 %
20/08/2014
25
01/01/2015
–
31/12/2015
219
220
Group Companies
Group’s
interest in
capital
Date of
inception /
acquisition
Acquisition
cost EURk
Fiscal year
Germany
Condor Real Estate Management
EINS GmbH
Subsidiary
acquired
100.00 %
20/08/2014
25
01/01/2015
–
31/12/2015
Condor Real Estate
Management ZWEI GmbH
Subsidiary
acquired
100.00 %
20/08/2014
25
01/01/2015
–
31/12/2015
Condor Real Estate
Management DREI GmbH
Subsidiary
acquired
100.00 %
20/08/2014
25
01/01/2015
–
31/12/2015
CONDOR Objektgesellschaft
Eschborn GmbH
Subsidiary
acquired
94.00 %
15/12/2014
1,550
01/01/2015
–
31/12/2015
Bad Kreuznach GmbH
Subsidiary
acquired
94.00 %
15/12/2014
113
01/01/2015
–
31/12/2015
FÜNF GmbH
Subsidiary
acquired
100.00 %
05/06/2014
25
01/01/2015
–
31/12/2015
Düsseldorf GmbH
Subsidiary
acquired
94.00 %
15/12/2014
793
01/01/2015
–
31/12/2015
Rendsburg GmbH
Subsidiary
acquired
94.00 %
30/09/2014
152
01/01/2015
–
31/12/2015
Bad Oeynhausen GmbH
Subsidiary
acquired
94.00 %
30/09/2014
160
01/01/2015
–
31/12/2015
Lichtenfels GmbH
Subsidiary
acquired
94.00 %
30/09/2014
194
01/01/2015
–
31/12/2015
YELLOW GmbH
Subsidiary
acquired
94.00 %
30/09/2014
1,387
01/01/2015
–
31/12/2015
Subsidiary
acquired
94.00 %
27/05/2015
4,016
01/01/2015
–
31/12/2015
Lumpsum Eastern European
Participations C.V.
Subsidiary
acquired
94.00 %
29/01/2012
N/A4
01/01/2015
–
31/12/2015
MAGNAT Investment II B.V.
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
MAGNAT Investment IV B.V.
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
R-Quadrat Polska Alpha sp.z o.o.
Joint venture
acquired
50.00 %
15/12/2014
N/A4
01/01/2015
–
31/12/2015
Subsidiary
acquired
99.64 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Undirectly held interests:
FOREIGN COUNTRIES
FOREIGN COUNTRIES
MAGNAT Investment I B.V.
» Appendix 1: Scope of consolidation
Group Companies
Group’s
interest in
capital
Date of
inception /
acquisition
Acquisition
cost EURk
Fiscal year
FOREIGN COUNTRIES
R-Quadrat Bulgaria EOOD
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
SC Victory International
Consulting s.r.l.
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Irao Magnat Digomi LLC
Subsidiary
acquired
75.00 %²
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Irao Magnat 28/2 LLC
Joint venture
acquired
50.00 %²
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Magnat Tblisi Office LLC
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
Magnat Tblisi Residential 1 LLC
Subsidiary
acquired
100.00 %
29/10/2009
N/A4
01/01/2015
–
31/12/2015
IRAO Magnat Gudiashvilli LLC
Joint venture
acquired
50.00 %³
04/04/2011
N/A4
01/01/2015
–
31/12/2015
MAGNAT Capital Markets GmbH
Subsidiary
acquired
100.00 %
05/05/2009
35
01/01/2015
–
31/12/2015
GO Leonberg ApS, Denmark
Subsidiary
acquired
94.00 %
11/12/2014
59
01/01/2015
–
31/12/2015
GO Bremen ApS, Denmark
Subsidiary
acquired
94.00 %
11/12/2014
221
01/01/2015
–
31/12/2015
GO Ludwigsburg ApS
Subsidiary
acquired
94.00 %
11/12/2014
45
01/01/2015
–
31/12/2015
Armstripe S.à.r.l.
Subsidiary
acquired
94.00 %
11/12/2014
408
01/01/2015
–
31/12/2015
Blue Ringed S.à.r.l.
Subsidiary
acquired
94.00 %
11/12/2014
118
01/01/2015
–
31/12/2015
Briarius S.à.r.l.
Subsidiary
acquired
94.00 %
11/12/2014
90
01/01/2015
–
31/12/2015
Reubescens S.à.r.l.
Subsidiary
acquired
94.00 %
11/12/2014
89
01/01/2015
–
31/12/2015
Denston Investments Ltd.
Subsidiary
acquired
94.00 %
11/12/2014
83
01/01/2015
–
31/12/2015
Subsidiary
acquired
94.00 %
30/10/2015
28,986
01/01/2015
–
31/12/2015
Interests are held indirectly through DEMIRE Deutsche Mittelstand Real Estate AG, Frankfurt/Main.
Interests are held indirectly through MAGNAT Investment I B.V., Hardinxveld Giessendam, Netherlands, and Lumpsum Eastern European Participations C.V., Osterhout, Netherlands. The Group holds a total of 50 % in Irao Magnat 28/2 LLC through numerous group companies.
3
Interests are held indirectly through MAGNAT Investment IV B.V., Hardinxveld Giessendam, Netherlands.
4
No disclosure was made because the relevant companies were acquired indirectly as part of the reverse acquisition.
5
No disclosure was made because the relevant companies were acquired in the context of the acquisition of Fair Value REIT-AG.
1
2
221
222
Appendix 2: Schedule of shareholdings pursuant to
Section 313 para. 2 HGB
Company
Type
Head office
Fiscal year
Equity in EURk
Interest
in capital
in %1
Profit/loss
of last fiscal
year
DEMIRE Deutsche Mittelstand Real
Estate AG
Group parent
company
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
111,507
Glockenhofcenter
Subsidiary
94.9
-141
Subsidiary
12,351
94.9
-82
Subsidiary
-358
94
-148
Subsidiary
1,761
94
140
DEMIRE
Immobilien Management GmbH
Subsidiary
25
100
3
Panacea Property GmbH
Subsidiary
10
51
0
Praedia GmbH
Subsidiary
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
3,038
Hanse-Center
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
97
51
72
Fair Value REIT AG
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
83,439
77.7
-1,968
IC Fonds & Co. Büropark Teltow KG
(„IC 07“)
Subsidiary
Germany,
Munich
8,295
60.74
230
IC Fonds & Co. Gewerbeportfolio
Deutschland 13. KG („IC 13“)
Subsidiary
Germany,
Munich
135
44.58
1,431
IC Fonds & Co. SchmidtBankPassage KG („IC 12“)
Subsidiary
Germany,
Munich
5,922
41.86
169
Subsidiary
Germany,
Munich
7,237
39.13
1,050
Subsidiary
Germany,
Munich
81
62.20
1,646
Subsidiary
Germany,
Munich
9,905
47.98
2,893
Subsidiary
Germany,
Munich
21,573
45.08
1,385
GP Value Management
GmbH („GPVM“)
Subsidiary
Germany,
Munich
47
77.70
3
BBV 3 GeschäftsführungsGmbH & Co. KG („FV03“)
Subsidiary
Germany,
Munich
44
77.70
12
Subsidiary
Germany,
Munich
42
77.70
13
Subsidiary
Germany,
Munich
67
77.70
33
BBV 10 Geschäft sführungsGmbH & Co. KG („FV10“)
Subsidiary
Germany,
Munich
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
41
77.70
10
-26,276
» Appendix 2: Schedule of shareholdings pursuant to Section 313 para. 2 HGB
Company
Type
Head office
Fiscal year
Equity in EURk
Interest
in capital
in %1
Profit/loss
of last fiscal
year
Subsidiary
Germany,
Munich
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
38
77.70
11
BBV Immobilien-Fonds Erlangen
GbR („BBV 02“)
Subsidiary
Germany,
Munich
306
32.65
-27
Subsidiary
Germany,
Munich
11,723
34.54
2,127
IC Fonds & Co. Gewerbeobjekte
Deutschland 15. KG („IC 15“)
Subsidiary
Germany,
Munich
15,128
37.46
1,700
Erste mbH
Subsidiary
Zweite mbH
Subsidiary
Dritte mbH
Subsidiary
Vierte mbH
Subsidiary
Fünfte mbH
Subsidiary
Sechste mbH
Subsidiary
Siebente mbH
Subsidiary
Achte mbH
Subsidiary
Neunte mbH
Subsidiary
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
24
100
0
24
100
0
24
100
0
24
100
0
24
100
0
24
100
0
24
100
0
24
100
0
24
100
0
Lumpsum Eastern European
Participations C.V.
Subsidiary
Netherlands,
Osterhout
01/01/2015
31/12/2015
-7
94
0
MAGNAT Investment I B.V.
Subsidiary
Netherlands,
Hardinxveld
Giessendamm
01/01/2015
31/12/2015
38
99.64
-14
R-Quadrat Bulgaria EOOD
Subsidiary
Bulgaria,
Sofia
251
100
-15
SC Victory International
Consulting s.r.l.
Subsidiary
Romania,
Bucharest
1,040
100
-18
Irao Magnat Digomi LLC
Subsidiary
Georgia,
Tbilisi
-1,550
75
-626
Irao Magnat 28/2 LLC
Joint venture
Georgia,
Tbilisi
-236
50
0
Magnat Tblisi Office LLC
Subsidiary
Georgia,
Tbilisi
44
100
0
Magnat Tblisi Residential 1 LLC
Subsidiary
Georgia,
Tbilisi
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
-1
100
-1
223
224
Company
Type
Head office
Fiscal year
Equity in EURk
Interest
in capital
in %1
Profit/loss
of last fiscal
year
MAGNAT Investment II B.V.
Subsidiary
Netherlands,
Hardinxveld
Giessendamm
01/01/2015
31/12/2015
-2,178
100
-7,960
MAGNAT Investment IV B.V.
Subsidiary
Netherlands,
Hardinxveld
Giessendamm
01/01/2015
31/12/2015
325
100
-8
IRAO Magnat Gudiashvilli LLC
Joint venture
Georgia,
Tbilisi
01/01/2015
31/12/2015
58
50
-33
R-Quadrat Polska Alpha sp.z o.o.
Joint venture
Poland,
Warsaw
01/01/2015
31/12/2015
-12,099
50
-756
SQUADRA Immobilien
GmbH & Co. KGaA
assoziiertes
Unternehmen
Germany,
Frankfurt/
Main
01/04/2015
31/03/2015
13,949
24.58
183
SQUADRA Erste Immobilien GmbH
Associated
company 3
100
-2,565
Associated
company 3
01/04/2015
31/03/2015
01/04/2015
31/03/2015
795
SQUADRA Management GmbH
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
9
100
-5
DEMIRE
Commercial Real Estate GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
9,714
100
0
DEMIRE Real Estate München 1
GmbH
Subsidiary
100
0
Subsidiary
8,949
100
151
CAM Commercial
Asset Management ZWEI GmbH
Subsidiary
-432
100
-159
CAM Commercial
Asset Management DREI GmbH
Subsidiary
-329
100
22
CAM Commercial
Asset Management VIER GmbH
Subsidiary
-443
100
-149
Schwerin Margaretenhof 18 GmbH
Subsidiary
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
21
CAM Commercial
Asset Management EINS GmbH
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
172
94.90
456
DEMIRE Commercial
Real Estate ZWEI GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
5
100
-20
DEMIRE
Objektgesellschaft Worms GmbH
Subsidiary
94
275
Subsidiary
01/01/2015
31/12/2015
01/01/2015
31/12/2015
3,737
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
-140
100
-162
Company
Type
Head office
Fiscal year
Equity in EURk
Interest
in capital
in %1
Profit/loss
of last fiscal
year
MAGNAT AM GmbH
Subsidiary
Austria,
Vienna
01/01/2015
31/12/2015
934
100
-22
Magnat Asset Management GmbH
Subsidiary2
Austria,
Vienna
3,225
100
-406
MAGNAT Capital Markets GmbH
Subsidiary
Austria,
Vienna
01/01/2015
31/12/2015
01/01/2015
31/12/2015
374
100
-6
DEMIRE CONDOR
Properties Management GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
-88
100
-107
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
-9,065
100
-4,131
EINS GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
1,002
100
977
GO Leonberg ApS, Denmark
Subsidiary
Denmark,
Copenhagen
-3,928
94
-333
GO Bremen ApS, Denmark
Subsidiary
Denmark,
Copenhagen
-19,092
94
-2,137
GO Ludwigsburg ApS
Subsidiary
Denmark,
Copenhagen
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
-2,638
94
111
ZWEI GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
1,325
100
1,300
Armstripe S.à.r.l.
Subsidiary
Luxembourg,
Luxembourg
-11,098
94
-1,879
Blue Ringed S.à.r.l.
Subsidiary
Luxembourg,
Luxembourg
-2,485
94
-400
Briarius S.à.r.l.
Subsidiary
Luxembourg,
Luxembourg
-2,293
94
-381
Reubescens S.à.r.l.
Subsidiary
Luxembourg,
Luxembourg
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
-3,134
94
-698
DREI GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
-55
100
0
Denston Investments Ltd.
Subsidiary
Cyprus,
Nicosia
-1,717
94
4
Eschborn GmbH
Subsidiary
91
94
0
Bad Kreuznach GmbH
Subsidiary
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
25
94
0
FÜNF GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
25
100
0
Düsseldorf GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
18
94
0
225
226
Company
Type
Head office
Fiscal year
Equity in EURk
Interest
in capital
in %1
Profit/loss
of last fiscal
year
Rendsburg GmbH
Subsidiary
94
19
Subsidiary
44
94
19
Lichtenfels GmbH
Subsidiary
55
94
30
YELLOW GmbH
Subsidiary
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
01/01/2015
31/12/2015
44
Bad Oeynhausen GmbH
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
Germany,
Frankfurt/
Main
25
94
0
DREI GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
-761
100
-786
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
28,986
94
1,117
VIER GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
19
100
-6
FÜNF GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
0
100
-25
SECHS GmbH
Subsidiary
Germany,
Frankfurt/
Main
01/01/2015
31/12/2015
24
100
0
1
2
3
The share in the equity corresponds to the control relationship before taking into account any non-controlling interests within the Group.
Indirect investment through Magnat AM GmbH (AT).
Indirect investment through SQUADRA Immobilien GmbH & Co. KGaA.
▼ Office building, Eschborn
227
228
Balance sheet oath
As the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG, we hereby confirm to the best
of our knowledge, and in accordance with the applicable reporting principles, that the consolidated
financial statements give a true and fair view of the net assets, financial position, and results of
oprations of the Group, and furthermore that the Group management report includes a fair review of
the development of the business including the results and the position of the Group, together with a
description of the principal opportunities and risks associated with the expected development of the
Group.
Frankfurt am Main, May 13, 2016
Frank Schaich
Vorstandssprecher (CEO)
Vorstand (COO)
Vorstand (CFO)
» Balance sheet oath | Auditor’s report
Auditor’s report
We have audited the consolidated financial statements prepared by DEMIRE Deutsche Mittelstand
Real Estate AG, Frankfurt/Main, comprising the consolidated balance sheet, consolidated statement
of income, statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows, and the notes to the consolidated financial statements as well as
the management report for the Group and the Company for the fiscal year from January 1, 2015 to
December 31, 2015. It is the responsibility of the governing bodies of the Company to prepare the
consolidated financial statements and the management report for the Group and the Company in
accordance with IFRS, as applicable in the EU, and with the supplementary provisions of the German
commercial law applicable pursuant to Section 315a para. 1 HGB. Our task is to deliver a judgment on
the consolidated financial statements and the management report for the Group and the Company on
the basis of the audit we have undertaken.
We have conducted our audit of the consolidated financial statements in accordance with Section 317 HGB
in consideration of the German auditing standards defined by the Institut der Wirtschaftsprüfer (IDW).
These require the audit to be planned and conducted in such a manner as to detect, with ad quate certainty, any inaccuracies or infringements which may have a significant impact on the impre sion of the
net assets, financial position, and results of operations, as conveyed by the consolidated financial statements in consideration of the applicable accounting standards, and by the management report for the
Group and the Company. In determining the actions to be taken as part of the auditing procedure, consideration was given to the knowledge of the business activities of the Group and its economic and legal
environment, as well as to the possible errors likely to be encountered. In the course of the audit, the
effectiveness of the internal accounting-related control system and proof of the information contained in
the consolidated financial statements and the management report for the Group and the Company were
assessed on the basis of random samples. The audit encompasses a review of the financial statements
of the companies included in the consolidated financial statements, the scope of consolidation, the accounting and consolidation principles applied, and the principal assessments made by the governing
bodies, as well as an evaluation of the overall presentation of the consolidated financial statements and
of the management report for the Group and the Company. We are of the opinion that our audit forms
an adequately secure foundation on which to base our judgment.
Our audit has caused us to raise no objections.
In our judgment based on the findings of our audit, the consolidated financial statements comply with
IFRS as applicable in the EU and with the supplementary provisions of German commercial law applicable pursuant to Section 315a para. 1 HGB, and in consideration of the principles of proper accounting
convey an image of the Group’s net assets, financial position, and results of operations which concurs
with the true circumstances. The management report for the Group and the Company is consistent
with the consolidated financial statements and overall presents an accurate image of the position of
the Group and the opportunities and risks of future development.
Eschborn / Frankfurt/Main, May 13, 2016
Ernst & Young GmbH
WirtschaftsprüfungsgeseIschaft
Schmitt
Kresin
Auditor
Auditor
229
230
Notes
» Imprint & Contact
Imprint & Contact
Company contact
Lyoner Straße 32
D-60528 Frankfurt/Main
T +49 (0)69 719 189 79-0
F +49 (0)69 719 189 79-11
[email protected]
www.demire.ag
Responsible publisher
The Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG
Concept and layout
GFEI Aktiengesellschaft
Status: May 2016
231
Lyoner Straße 32
D-60528 Frankfurt/Main
T +49 (0)69 719 189 79-0
F +49 (0)69 719 189 79-11
[email protected]
www.demire.ag

AnnuAl RepoRt 2015

Transcription

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